Celebrating One

Year Of Service

2

Contents

Torres Strait Island Regional Council 3

What Services Does the TSIRC Provide 4

Mayor’s Report 5

CEO’s Report 7

Introducing the Councillors 8

Councillor Remuneration 9

Council Meeting Attendance 10

Human Resources & Code of Conduct 11

Statutory Disclosures 12

Expenses Reimbursement Policy 14

Community Financial Report 15

Photos 30

Financial Report 32

3

The Torres Strait Island Regional Council

This year, the Torres Strait Island Regional Council (TSIRC) celebrated its first birthday.

Formed in 2008 as part of the Queensland Government’s local council amalgamation policy, the TSIRC is an

entirely new local council governed under the Local Government Act 1993.

Prior to this, the communities in the TSIRC area came under the jurisdiction of the Community Services

(Torres Strait) Act 1984 and each had their own independent Island Council.

The Torres Strait Islands are located in Far North

Queensland, scattered between the tip of the Cape

York Peninsula and Papua New Guinea.

The Torres Strait shares an international border with

Papua New Guinea and is located close to Indonesia.

The location of the area has earned it the nick-name

‘Australia’s buffer zone’

This fact, along with the remote location and island

environment brings with it a unique set of require-

ments and challenges for the new TSIRC.

4

The role of a council, like the TSIRC, is to decide on facilities and services for communities and to make local

laws. Traditionally councils have provided services such as road maintenance, water and waste but now

more and more local councils like the TSIRC are involved in social, economic and cultural development and

improving the liveability and sustainability of the region.

Unlike most local councils, the TSIRC is in charge of fifteen separate communities, each with its own facili-

tates and service requirements. This unique situation, coupled with the remote location and island environ-

ments adds further dimension to the complexity of providing services to the area.

What services does the TSIRC provide?

A few examples of the services the

TSIRC provide are:

Water and sewerage

Waste

Child care

Planning

Environmental health

Housing

Canteens, bistros and taverns

Resorts, motels and guesthouses

Libraries

Roads

5

Mayor’s Report

Firstly, I want to acknowledge traditional owners, elders and youth of the Torres Strait. It has been a blessing

and a privilege to serve you in this first year as the Mayor of the new Torres Strait Island Regional Council

(TSIRC).

This year we have faced significant challenges in setting up the Council but I am pleased to say that we have

also achieved some substantial mile-stones.

The TSIRC now has a Corporate Plan, a ‘roadmap’ that underpins our strategic direction. The Plan, based on

direct community input, represents the needs and desires of residents. By closely adhering to the Corporate

Plan, Council can ensure that our priorities over the next five years are in line with communities’ priorities.

The Corporate Plan addresses a wide range of issues such as environmental protection, culture and arts, pub-

lic health and economic development. In all these areas and more we have begun to lay the foundations to

make progress towards achieving our goals.

The Ranger Program implemented to preserve and protect our unique island environment for example was

launched earlier this year in Mabuiag. The Program, run in partnership with the Torres Strait Regional Author-

ity and the Caring for Our Country Program, has been met with great community support and the Rangers

are already making a significant contribution to protecting our lands and sea.

The Ranger Program combines science with traditional knowledge to ensure the very best protection of our

delicate island eco-system and sacred sites. It also provides valuable full-time employment and training for

community members.

Our Corporate Plan also addresses the area of housing and pinpoints the need to find a solution to over-

crowding. Since our formation we have been pressing the issue with government and recently secured

$10million in additional funds from the Department of Communities to build new, or extend current, housing

structures. Next year will see the fruition of this acquisition in funds and the development will relieve some of

our most affected families.

The TSIRC is committed to economic and community development. During the past financial year we com-

pleted and opened a number of new enterprises such as the Dhamuway Bistro on Saibai Island and the

Mabuiag Motel on Mabuiag Island. We have also committed funding, and are continuing to negotiate with

the Queensland Government, to complete the resort on Warraber.

Early in our term Council made the decision to divest TSIRC owned enterprises such as the motels, bistros, tav-

erns and freezers back to community owned and run organisations. This process begun in earnest this finan-

cial year. Council proactively engaged with community organisations and consultants were hired to visit

communities to document the current viability of enterprises. Next year Council will begin to divest some

enterprises back to community organsiations.

6

Amalgamation has had its challenges but it has also provided us with the opportunity for fifteen individual

communities to unite as one voice, under one umbrella. As a consequence the Councillors and I have been

busy engaging the Queensland and Federal Governments on important regional issues such as housing,

climate change, policing, health, the high cost of living, a regular transport service, education and economic

development. By working together within our electorate area and developing strong partnerships with influ-

ential bodies such as the Torres Shire Council and Torres Strait Regional Authority we are successfully moving

important Torres Strait issues to the forefront of the public agenda.

One of the more prominent issues discussed with government and communities is the proposed change to

our current governing structure and the push towards a territory government for the region. The first round

of consultations in the TSIRC electorate area took place in March and much of the behind-the-scenes plan-

ning is now completed. Next financial year will see the conclusion of the second round of consultations with

communities and a proposed model of governance put to the people.

Throughout this process we will be providing community members with clear, accurate and timely informa-

tion so that together, we can make an informed decision on the future of the region.

I look forward to the year ahead. A year that will build on foundations already laid. A year of development.

Mayor Fred Gela

7

CEO’s Report

I am pleased to be contributing to this very first annual report for the Torres Strait Island Regional Council as

we celebrate just one year of Council’s establishment.

Amalgamation has seen the area move from a community focused model to a region-wide approach and with

this new direction there have been many new opportunities and challenges.

A region-wide focus has meant that as an organisation we now command more economies of scale. Services

can be commissioned for the region at a cheaper price overall and equipment and skills can be shared across

communities. The challenge has always been - how to effectively combine no less than fifteen separate Island

Council operating structures into one organisation.

This year was about forming an administration arm that can meet the needs of the region. It was about team

building, implementing strategy, processes and procedures.

Much of the focus has concentrated on creating an efficient organisational structure; involving the transition

of existing employees and recruiting for new positions. Now with a strengthening team in place we have

steadily begun to move forward with service delivery.

In the area of Environmental Health and Communities team building, training and development has under-

pinned activities and while capacity building is ongoing, some important achievements have already been

made.

Waste management has been identified as needing to be upgraded and made compliant with legislation.

Council have embarked on a review of our current solid waste disposal systems and early in the new financial

year, a waste pilot project will be launched to test a model that encourages a reduce, reuse and recycle meth-

odology.

A consultant veterinary clinic has been appointed to care for sick animals, de-sex animals that are presented by

the community, address feral animal populations and train Animal Management Workers. This has been met

with overwhelming community support.

In Engineering Services there has also been a push to upskill our workforce, transition the majority of our water and sewerage operators from CDEP to full-time employees and build capacity in our civil works team.

Over the year, five new sewerage schemes including Masig, St Pauls, Kubin, Warraber and Mabuiag have been constructed under the government supported Major Infrastructure Program (MIP) and handed over to Council. New paved roads are also under construction in Mabuiag as part of the Program and are to be completed in the new financial year.

Finance and Corporate Governance has begun to consolidate the accounts from the fifteen previous councils and incorporate this information into the new structure. New policies and procedures have been implemented throughout the year including budgets, internal auditing, banking systems and payroll to ensure we are com-pliant with standard operating procedures for an orgnaisation of our size. I firmly believe that a strong team, thorough planning and clear procedures build a solid foundation for a large organisation such as the TSIRC. I look forward to building further momentum over the year ahead.

John Scarce

8

Ordinary Council Meetings Attended

Standing Committee Meetings

Councillor Name

Ordinary Meetings

Attended

Total Ordinary

Meetings Held

Mayor Fred Gela 14 14

Deputy Mayor Kenny Bedford 13 14

Cr Donald Banu 10 14

Cr Raymond Soki 13 14

Cr Ron Enosa 8 14

Cr Keith Fell 13 14

Cr Wayne Guivarra 12 14

Cr David Bosun 8 14

Cr Toshie Kris 11 14

Cr Nancy Pearson 13 14

Cr Walter Mackie 13 14

Cr Willie Lui 13 14

Cr Philemon Mosby 13 14

Cr John Mosby 13 14

Cr Florianna Bero 13 14

Cr Ron Day 10 14

Councillor Name

Standing Committee

Meetings Attended

Standing Committee

Meetings Held*

Mayor Fred Gela 24 36

Deputy Mayor Kenny Bedford 8 11

Cr Donald Banu 7 11

Cr Raymond Soki 7 11

Cr Ron Enosa 5 12

Cr Keith Fell 9 11

Cr Wayne Guivarra 9 12

Cr David Bosun 7 11

Cr Toshie Kris 7 11

Cr Nancy Pearson 12 12

Cr Walter Mackie 5 12

Cr Willie Lui 12 12

Cr Philemon Mosby 10 11

Cr John Mosby 11 11

Cr Florianna Bero 8 11

Cr Ron Day 9 11

* note councillors (excl.

Mayor) were not members

of all committees

9

Human Resources

Council is committed to providing a safe and healthy working environment for all employees. Council prac-

tices Equal Employment Opportunities (EEO) and is in the process of formalising an EEO policy.

Although no formal policy is in place yet, the TSIRC is nevertheless actively promoting this notion through

our recruitment process. All recruitment is conducted in transparent manner. The process involves the provi-

sion of detailed position descriptions, internal and external advertising, shortlisting by the vacancy manager,

panel interviews and reports. To ensure the transparency of this process the interview panel must contain

the vacancy manager, a member of the Human Resources team and an independent officer.

Council also promotes the employment of Torres Strait Islanders to positions where appropriate and offers a

range of cadet, apprentice and trainee positions to assist young or unskilled people to get into the work-

force. The Torres Strait Island Regional Council is now one of the largest employers of Torres Strait Islanders

in the region.

In the 2009/10 financial year Council will be introducing an Enterprise Bargaining Agreement (EBA). This

process has already involved extensive consultation with stakeholders, including trade unions. The EBA will

contain flexibility provisions for training and development leave and the recognition of leave for cultural

activities or caring for families.

Councillor’s Code of Conduct

Total number of breaches of the local governments

code of conduct committed by councillors

NIL

Name of each councillor who breached the code, a

description of the breach and penalty

NIL

Number of complaints of alleged breach, other

than frivolous and vexatious, referred to conduct

review panel

NIL

Number of recommendations made to Council by

review panel that were adopted, not adopted by

Council

NIL

Number of complaints resolved under general

complaints process and No. relating to councillors

NIL

Number of complaints made to Ombudsman and

notified to Council re enforcement decisions of

Council

NIL

10

Introducing the Councillors

Hammond Mayor Fred Gela

Division one Boigu Cr Donald Banu

Division two Dauan Cr Raymond Soki

Division three Saibai Cr Ron Enosa

Division four Mabuiag Cr Keith Fell

Division five Badu Cr Wayne Guivarra

Division six Kubin Cr David Bosun

Division seven St Pauls Cr Toshie Kris

Division eight Hammond Cr Nancy Pearson

Division nine Iama Cr Walter Mackie

Division ten Warraber Cr Willie Lui

Division eleven Poruma Cr Phillemon Mosby

Division twelve Yorke Cr John Mosby

Division thirteen Ugar Cr Florianna Bero

Division fourteen Erub Deputy Mayor Kenny Bedford

Division fifteen Mer Cr Ron Day

The members of the TSIRC and Kaurareg Elder at the first Ordinary Meeting: Front Row: Nancy Pearson (Hammond),

Donald Banu (Boigu), Kaurareg Elder John Mills, Mayor Fred Gela, Deputy Mayor Kenny Bedford (Erub), Florianna Bero

(Ugar), Wayne Guivarra (Badu). Back Row: Walter Mackie (Iama), Phillemon Mosby (Poruma), Keith Fell (Mabuiag), John

Mosby (Masig), Ron Enosa (Saibai), Mario Soki (Dauan), Toshi Kris (St Pauls), Ron Day (Mer), Willie Lui (Warraber) and

David Bosun (Kubin). Photo courtesy of Torres News.

11

Councillor Remuneration

Ordinary Meeting March 2008 Moved Cr Kris, Seconded Cr Bosun that the Council adopts the remuneration

policy plus an amalgamation allowance (determined as a fixed amount) as per below, to be paid in equal monthly

instalments:

Councillors 35% $44,300

Deputy Mayor 40% $50,620

Mayor 55% $69,610

Ordinary Meeting April 2008: Moved Cr. Bedford, Seconded Cr. Banu that Council proposes to make the Expense

Reimbursement Policy as presented, and to forward the Director-General for his approval before formally adopting

and publicly advertising.

Ordinary Meeting 23 July 2008: Moved Cr Soki, Seconded Cr Mackie that Council endorses Mr Bedford’s request

for Council to cover his T/A and accommodation expenses to attend a Media Training in Cairns on the 31 July, as

per the TSIRC Expenses Reimbursement Policy under Discretionary Professional Development. Motioned Carried.

Ordinary Meeting 27 January 2009: Moved Cr Bedford, Seconded Cr Fell that Council in accordance with section

236A of the Local Government Act authorize the remuneration of Mayor, Deputy Mayor and Councillors to be the

top of the scale as detailed in the Remuneration Tribunal report December 2008, plus the amalgamation allowance

effective 1 January 2009. Motion carried.

Ordinary Meeting 30 June 2009: Moved Cr Pearson, Seconded Cr Bero that Council refers the provided policy to

the Associate Director General of the Department of Infrastructure and Planning for review prior to formally adopt-

ing at the July Ordinary Meeting of Council. Motion carried.

Ordinary Meeting 30 June 2009: Moved Cr Bedford, Seconded Cr Pearson that Council adopt the Entertainment

& Hospitality Policy for the 2009/10 budget year in accordance with s9 of the Local Government Finance Standard

2005, as presented. Motion carried.

Resolutions Relating to Councillor Remuneration

Councillor*

Remuneration &

Amalgamation Loading

Travel

Allowance

Fred Gela $104, 203.08 $7,636.90

Kenny Bedford $70,465.49 $2,195.70

Toshie Kris $57,661.66 $1,070.95

Raymond Soki $57,661.66 $2,725.55

Ron Enosa $57,661.66 $2,271.60

Ron Day $57,661.66 $1,874.90

Keith Fell $57,661.66 $3,374.10

Walter Mackie $57,661.66 $2,589.95

Nancy Pearson $57,661.66 $2,233.85

Willie Lui $57,661.66 $2,567.15

Florianna Bero $57,661.66 $3,828.20

Wayne Guivarra $57,661.66 $2,684.05

Phillemon Mosby $57,661.66 $2,784.80

John Mosby $57,661.66 $3,212.05

Donald Banu $57,661.66 $2,575.15

David Bosun $57,661.66 $2,003.80

* Note remuneration is based on a 15 month period

12

Statutory Disclosures

Type of Expenditure $ Spent

Entertainment and Hospitality $8,861

Advertising $0

Community Grants $19,010

Summary of Expenditure, Hospitality, Advertising and Grants

Accounting and Management Consultants

Firm Name $ Spent

JPS Consulting Service $25,148

Jessup and Partners $204,751

Kleinhardt Business Consult-

ants $6,968

KPMG $29,037

MLCS Corporate $22,083

Moller Family Trust $15,294

Pacifica Chartered Accountants $7,590

RPM $184,956

WHK Greenwoods $110

A. J. Wright $4,218

Total $500,155

Engineering

Black and Moore $68,700

Maunsell Australia $23,581

NBC Consultants $239,617

O'rourke Barnes and Associates $7,447

PDR Engineers $6,250

Peddlethorp Architects $6,104

Remote Project Management $174,482

Total $526,181

Summary of Expenditure on Consultants

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Overseas Travel

The CEO, John Scarce took a study tour to New Zealand as part of the State Government’s working group on

the new Local Government Act. The trip was paid for by the Local Government Association of Queensland

(LGAQ).

Special Rates and Charges

The Council levied no special rates or charges on land for the period ending 30 June 2009.

Rates Rebates and Concessions

The Council did not levy general rates – therefore, no rebates or concessions were applied.

Council’s Borrowing Policy

The following principles are accepted financial management principles associated with non-current liability management.

Borrowings will not be utilised to fund re-current operations;

Borrowings will be ‚matched‛ with the profile of the asset;

Borrowings for new assets should be linked with income producing assets that create wealth;

Before Borrowings are undertaken a risk evaluation on the asset or works is required to be undertaken to enable Council make a fully informed decision;

The ratio of Interest and Redemption to Grant Income should remain less than ten (10) percent;

Borrowings will only be for assets identified in Council planning including Strategic Plans, Management Plans, Five and Ten Year Capital Works Plans or other documentation of a Strategic Nature e.g. State / Federal Gov-ernment Planning; and

Where transactions are considered ‚off-balance sheet‛ a full financial analysis including a risk assessment is undertaken in accordance with State Government Guidelines to ensure the Council is receiving ‚value for money‛.

Invitations to Change Tenders

Invitations to submit a revised tenders were invited for the MIP 4 Sustainability Asset Renewal Project after a

review was conducted on the ranking criteria.

Ordinary Meeting 30 June 2009 Moved Cr Pearson, Seconded Cr Day that the Committee recommend to

Council the acceptance of the revised tender submitted by Maunsell AECOM for Project Management of the

Asset Renewal Project.

Expressions of Interest

Expressions of interest were called for the regional waste management strategy.

Ordinary Meeting 20 August 2008: Moved Cr Pearson, Seconded Cr Lui that the Executive Manager for

Communities call for expressions of interest from suitably qualified consultants to develop management plans

for the operation of 15 community rubbish tips.

14

Registers

The Council keeps the following registers open to public inspection:

Register of Councillor Interests

Register of Disclosure of Election Gifts

Register of Delegations of Authority by Council

Names of shareholders delegates of the local government for its LGOCs

For the period ending 30 June 2009, the Council controlled no LGOC’s.

List of all business activities (National Competition Policy)

The Council had no identified business activities for the period ending 30 June 2009.

Disclosure of Cross Subsidies

The Council did not levy water and sewerage rates for the period ending 30 June 2009.

Corporate and Operational Plan

The Council used the financial year to June 2009 to consult with its community and draft a Corporate Plan. The Corporate Plan for Torres Strait Island Regional Council was put to consultation in March 2009 after ex-tensive community engagement. Further to this, the Corporate Plan was adopted in June 2009.

The Operational Plan was adopted at the time of the Budget in October 2008. There were no changes to the Operational Plan for the period ending 30 June 2009. The Operational Plan was reviewed to ensure progress was being achieved in the implementation of Council policies, initiatives and targets.

Reserve Land Controlled by Council

Council does not control any reserve land Length of roads controlled by Council

Island Name

Total Road

Length (m)

Total Road

Length (km)

Ugar 2815 2.8

Dauan 3762 3.8

Poruma 4402 4.4

iama 4812 4.8

Boigu 6392 6.4

Saibai 7596 7.6

masig 8468 8.5

Warraber 11060 11.1

Mabuiag 11505 11.5

Mer 12762 12.8

Erub 15710 15.7

Hammond 23846 23.8

Badu 82017 82.0

Moa 86716 86.7

281863 281.863

15

Expense Reimbursement Policy

Commencement

The Torres Strait Island Regional Council expenses reimbursement policy will take affect from the date Council formally adopts this date will appear on the last page of the policy under the heading certification.

Background

In developing an expense reimbursement policy the Council must comply with guidelines issued by the Chief Executive Officer of the Department of Local Government, and sections 236B, 250AR, 250AS, 250AT and 250AU of the Local Government Act 1993.

Purpose

The purpose of the policy is to ensure that councillors (including mayors) can receive reimbursement of rea-sonable expenses and be provided with necessary facilities in performance of their role.

Statement of Principles

The policy complies with the Statement of Principles, set out in the guidelines:

• Reasonable expenses reimbursement to councillors

• Public accountability and transparency

• Public perceptions and community expectations

• No private benefit to be derived

• Equity and participation

Payment of Expenses

Expenses will be paid to a councillor through administrative processes approved by a council’s Chief Executive Officer subject to:

• The limits outlined in this policy and

• Council endorsement by resolution.

Expense Categories

Representing Council

Where Council resolves Councillors are required to attend conferences or workshops to either deliver a paper or as a delegate of Council; Council will reimburse expenses identified by resolution, associated with attend-ing the event since participation is part of the business of Council.

16

Professional development

A local government will reimburse expenses incurred for:

• Mandatory professional development

Where Council resolves that all Councillors are to attend training courses or workshops for skills development related to a Councillors role, the Council will reimburse expenses identified by resolution, that being the total cost of the course plus associated expenses and

• Discretionary professional development

Where a Councillor identifies a need to attend a conference, workshop or training to improve skills relevant to their role as a Councillor, other than Mandatory training, Council will reimburse expenses identified by resolu-tion to a maximum of $5,000 for the current term of their office.

Travel as required to represent council

A local government may reimburse local and in some cases interstate and overseas travel expenses (e.g. flights, car, accommodation, meals and associated registration fees) deemed necessary to achieve the business of council where:

A councillor is an official representative of council and

The activity/event and travel have been endorsed by resolution of council.

Councillors are to travel via the most direct route, using the most economical and efficient mode of transport. Council will pay for reasonable expenses incurred for overnight accommodation when a councillor is required to stay outside the local government’s region.

NOTE: Any fines incurred while travelling in council-owned vehicles or privately owned vehicles when attend-ing to council business, will be the responsibility of the councillor incurring the fine.

If a Councillor travels using their private vehicle, a log is to be kept of the mileage travelled and the reimburse-ment will be in accordance with the Australian Taxation Office rulings for the engine capacity of the vehicle used.

Travel bookings

All councillor travel approved by Council will be booked and paid for by Council.

Economy class is to be used, however for journeys of three (3) hours or more and it being the fourth (4) time of travel in the current term of office for Council business, paid directly by Council (that is not recovered from a second party as a result of a meeting, training or workshop requested by them), Business class is to be used where available.

Airline tickets are not transferable and can only be procured for the councillor’s travel on council business. They cannot be used to offset other unapproved expenses. (e.g. cost of partner or spouse accompanying the councillor.)

Travel transfer costs

Any travel transfer expenses associated with councillors travelling for council approved business will be reim-bursed.

Example: Trains, taxis, buses and ferry fares. Cab charge vouchers may also be used if approved by Council

where Councillors are required to undertake duties relating to the business of council.

17

Private vehicle usage

Councillor’s private vehicle usage may be reimbursed by council if the:

• Travel has been endorsed by council resolution

• Claim for mileage is substantiated with log book details and

• Total travel claim does not exceed the cost of the same travel using economy flights plus the cost of taxi transfers.

Reimbursement will be in accordance with the Australian Taxation Office rulings for the engine capacity of the vehicle used.

Accommodation

All Councillor accommodation for Council business will be booked and paid for by Council. Council will pay for the most economical deal available. Where possible, the minimum standards for councillors’ accommo-dation should be four (4) star rating. Where particular accommodation is recommended by conference or-ganisers, council will take advantage of the package deal that is the most economical and convenient to the event.

Meals

A local government will reimburse costs of meals for a councillor when:

The councillor incurs the cost personally and

The meal was not provided:

- Within the registration costs of the approved activity/event

- During an approved flight.

The following limits apply to the amount councils will reimburse for meals:

Breakfast $19.60

Lunch $20.05

Dinner $34.55

No alcohol will be paid for by council.

Incidental allowance

A $20 per day will be paid by a Council to cover any incidental costs incurred by Councillors required to travel, and who are away from home overnight, for official Council business.

Hospitality

Council provides a $500 per annum Hospitality Expenditure for all Councillors.

Council provides a $2,000 per annum Hospitality Expenditure for the Mayor.

The Mayor and the Councillors will provide evidence of the expenditure to the Standing Committee for Fi-nance and Corporate who will recommend to Council the amount to be reimbursed. Upon Council resolu-tion the Hospitality Expenditure will be reimbursed to the Mayor or Councillor.

18

Provision of Facilities

All facilities provided to councillors remain the property of council and must be returned to council when a councillor’s term expires.

Private use of Council owned facilities

Based on the principle that no private benefit is to be gained the facilities provided to Councillors by Local Governments are to be used only for Council business unless prior approval has been granted by resolution of Council and are in accordance with the charges for private use as set out in this policy.

Facilities Categories

Administrative tools

Administrative tools are to be provided to Councillors as required to assist Councillors in their role.

Administrative tools include:

Office space and meeting rooms

Computers

Stationery

Access to photocopiers

Printers

Facsimile machines

Publications

Use of council landline telephones and internet access in council offices.

Secretarial support may also be provided for Mayors and Councillors under a directive given by the Chief Ex-ecutive Officer to staff concerned.

Council may via a separate resolution provide a Councillor with home office equipment including computer, internet access if necessary.

Maintenance costs of council owned equipment

Council will be responsible for the ongoing maintenance and reasonable wear and tear costs of council-owned equipment that is supplied to councillors for official business use. This includes the replacement of any facilities which fall under council’s asset replacement program.

Name badge and uniform

The Council will provide Councillors with a name badge

The Council may by separate resolution authorise personal protective equipment and/or a uniform of the Council.

Use of council vehicles on council business

Councillors will have access to a council vehicle for official business.

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Private use of vehicles

Councillors do not have the ability to full private use of Council owned vehicles, they can utilise from vehicles in the Car Pool for official Council business use and private use, and however the vehicle must be made avail-able for all Council personnel to utilise as a priority over any private use.

Private use of Council owned vehicles is to be recorded in a log book with the date of use and mileage trav-elled, each month the log book will be expected by Council staff to calculate the mileage travelled, the Coun-cillor will reimburse Council the mileage travelled in accordance with the Australian Taxation Office rulings for the engine capacity of the vehicle used.

Telecommunication needs – mobile devices

Council owned mobile telecommunication devices may be used by Councillors for official Council business use, any personal calls must be reimbursed to Council, a copy of the phone bill will be provided to the Coun-cillor for identification of personal calls, and payment is to be made immediately.

Alternately if a mobile telecommunication devise is not made available to a Councillor a listed telephone can be placed at a Councillors residence with a reimbursement of 50% of all charges and local call costs, any STD or International calls associated with Council business will also be reimbursed if a receipt and certification is provided.

Home internet access will be reimbursed 50% of the package cost.

Insurance cover

Council will indemnify or insure Councillors in the event of injury sustained while discharging their civic duties. Council will pay the excess for injury claims made by a Councillor resulting from conducting official Council business.

Fuel costs

Fuel for a council-owned vehicle used for official council business, will be provided or paid for by council.

Certification

This and the preceding five (5) pages bearing my initials has been adopted by Council at its meeting held on the 25

th June 2008.

John Scarce

CHIEF EXECUTIVE OFFICER

20

Community Financial Report

15 March 2008 - 30 June 2009

This community financial report shows a summary of the financials statements with the aim of providing easily understood information to the members of our community. Through the use of graphs it also assists readers to evaluate Council’s financial performance and financial position.

The former Island Councils were amalgamated on 14 March 2008. This has meant the financial statements for the period ending 30 June 2009 for Torres Strait Island Regional Council actually start on 15 March 2008, concluding on 30 June 2009.

There are four financial statements which provide different information.

These are:

The Income Statement

This statement shows the income (or revenue) and the operational expenditure for the year. This then creates a profit (where income exceeds expenses) or loss (where expenses exceed income) for Council. This profit or loss is known as the net result attributable to Council.

The Balance Sheet

This statement shows all of the assets (what is owned and owing to Council) and liabilities (what Council owes). This statement also shows the total community equity, being total assets minus total liabilities. Total community equity can help to show how healthy the position of Council is at a given point in time. The more that assets are greater than liabilities, the better the position of Council.

The Statement of Changes in Equity

This statement shows the movements between elements of Community Equity shown in the Balance Sheet.

The Statement of Cashflows

This statement shows the nature and amount of cash inflows/outflows of council activities.

21

Revenue – where did the dollars come from?

Council received $78 million in revenue during 2008/09. This was primarily from recurrent grants of $51 mil-lion which accounted for 65% of total revenue. Capital grants made up 16% of revenue. The remaining revenue is sourced from recoverable works, interest revenue, rental income, fees and charges and net rates

Expenditure by Type

Materials & services

28.71%

Finance costs

0.11%

Depreciation &

amortisation

28.17%Employee benefits

42.93%

Provision for restoration

of land

0.08%

Total expenses of $98 million were incurred during March 2008 and June 2009, which were primarily for em-ployee costs of $42 million and materials and services of $28 million which together made up 71% of total expenditure. The remaining expenditure is made up of depreciation, increase in restoration of land provision and finance costs.

Sources of Revenue

Recurrent Grants

65.12%

Net rate and utility

charges

0.02%

Interest received

0.85%

Other recurrent income

8.19%

Recoverable works

2.63%

Profit from investments

0.00%

Rental income

4.76%

Fees & Charges

1.79%

Capital Grants

16.65%

22

Net Result attributable to Council

Financial Performance - Net Result

-

100

200

300

400

500

600

700

2008/09 2009/10 2010/11 2011/12

$ M

illi

on

s

The net result is the difference between revenue received and the operating expenses incurred by Council throughout the year on an accrual basis. The 2008/2009 net result is $554 million which indicates that reve-nue is $554 million greater than expenses. This does not represent surplus funds however, as two significant items of revenue are included in this surplus. They are:

Revenue from Assets and Liabilities from Abolished Councils – This revenue of $254 million, is the net value of the former Island Councils transferred to Torres Strait Island Regional Council at 15 March 2008.

Revenue from Adjustments in Accounting Policy - This revenue of $319 million, is primarily difference be-tween asset values recorded by the former Island Councils and the fair value of assets at amalgamation.

Therefore, the surplus is not actual cash, but rather fixed assets in the form of, for example – water and sew-age treatment plants, roads and buildings.

23

Financial Performance - Net Operating Position

(35)

(30)

(25)

(20)

(15)

(10)

(5)

-

5

10

15

2008/09 2009/10 2010/11 2011/12

$ M

illio

ns

The operating position is calculated by taking total operating expenditure from the total operating revenue. Operating revenue in this calculation does not include any revenue for capital projects.

In many ways the operating position is the best measure of Council’s financial performance in a given year. The operating position gives an indication of Council’s ability to continue operating at sustainable levels, as well as Councils ability to fund the future acquisition and replacement of assets.

The Council is showing a loss level in terms of operating position, principally due to recognition of deprecia-tion (or consumption of assets).

Operating Position

24

Assets – what we own and what is owing to us

Assets at 30 June 2009

Trade and other

receivables

2.34%

Cash and cash

equivalents

2.73%Inventories

0.16%

Investments

0.06%

Capital works in

progress

0.63%

Property, plant and

equipment

94.09%

The major components of assets include property, plant and equipment, land, roads, water and sewerage, housing, capital works in progress and cash assets. These assets represent 96% of all assets.

Cash Position

13

14

14

15

15

16

16

2008/09 2009/10 2010/11 2011/12

$ M

illi

on

s

Cash Position at Year end Unrestricted cash balance

The cash position at 30 June 2009 was $15.5 million. The unrestricted cash balance (total cash less con-strained grant funds) was $13.9 million.

25

Liabilities – what we owe

Liabilities at 30 June 2009

Trade and other payables

61.07%

Other

11.15%

Provisions

22.91%

Borrowings

4.87%

Council’s liabilities include loans, amounts owing to suppliers, and amounts owing to employees for leave en-titlements. Total liabilities at 30 June 2009 were $13.6 million.

Debt Per House

-

100

200

300

400

500

600

700

800

2008/09 2009/10 2010/11 2011/12

$

The debt per community house is $667 at 30 June 2009.

26

Council’s current borrowing policy requires:

No use of long term debt to finance operating activities or recurrent expenditure;

Priority will be given in any borrowing program to income producing assets;

These borrowings are repaid on a monthly basis in accordance with the terms and conditions set by the Queensland Treasury Corporation. The repayment terms are reviewed on a regular basis in order to ensure that the expected loan term aligns with market movements.

Debt Per House

-

100

200

300

400

500

600

700

800

2008/09 2009/10 2010/11 2011/12

$

The debt per community house is $667 at 30 June 2009.

CONCLUSION

At 30 June 2009, Torres Strait Island Regional Council recorded a substantial operating deficit. This deficit was princi-

pally driven by the recognition of depreciation in the accounts. At present, the revenue streams of Council are not ade-

quate to cover the operational costs (including depreciation) of Council.

27

The Queensland Department of Infrastructure and Planning has published a Financial Management (Sustainability) Guideline. The Department has defined sustainability in the Queensland Local Government sector as:

A local council is sustainable if its infrastructure capital and financial capital is able to be maintained over the long term.

The Department has published a number of Financial Ratios as measures of sustainability.

Financial ratios provide a useful snapshot of Council’s status. These ratios are calculated by dividing a dollar amount of one item reported in the financials statements by the dollar amount of another. The result is a re-lationship between two related items that is easy to interpret and is also useful in comparing Torres Strait Is-land Regional Council to other Councils.

Ratio Calculation Information Target Actual

Working Capital Ratio Current Assets

_____________________

Current Liabilities

This is an indicator of the management of working capital. Measures the extent to which a council has liquid assets avail-able to meet short term financial obliga-

tions.

Greater than 1:1 1:3

Operating Surplus

Ratio

Net Operating Surplus

______________________

Total Operating Revenue

This is an indicator of the extent to which revenues raised covers operational ex-penses or are available for capital fund-

ing.

Between 0% and

15%

-30%

Net Financial Liabili-

ties Ratio

Total Liabilities - Current Assets

__________________________

Total Operating Revenue

This is an indicator of the extent to which the net financial liabilities of council can

be serviced by its operating revenues.

Not Greater than

60%

-25%

Interest Coverage

Ratio

Net Interest Expense on Debt

__________________________

Total Operating Revenue

This ratio indicates the extent to which council's operating revenues are commit-

ted to interest expense.

Between 0% and

10%

0.09%

28

Sustainability Indicators

Ratio Calculation Information Target Actual

Asset Sustainability

Ratio

Capital Expenditure on Replace-

ment Assets

____________________________

______

Depreciation Expense

This is an approximation of the extent to which the infrastructure assets are being replaced as they reach the end of their

useful lives.

Greater than 90% 1%

Asset Consumption

Ratio

Written Down Value of Infrastruc-

ture Assets

____________________________

___

Gross Current Replacement Cost

The average proportion of "as new" value remaining in infrastructure assets. This ratio highlights the aged condition of

council's stock of physical assets.

Between 40%

and 80%

95%

Asset Renewal Fund-

ing Ratio

Net Present Value of Planned Capital Expenditure on Renewals

over 10 years

____________________________

__

Net Present Value of Required

Capital Expenditure on Renewals

This represents the extent to which the required capital expenditures on renewals have been incorporated into the 10 Year

Financial Model of Council.

Greater than 90% Due to Grant Fund-ing uncertainty it is not possible to cal-culate this indicator.

29

This Community Financial Report and Financial Sustainability Indicator Report has been compiled in accor-dance with:

Local Government Finance Standard 2005 s.23(1)/(2)(b):

This section states particular matters that a local government’s annual report for a financial year must con-tain.

The matters are –

(b) a community financial report that is –

consistent with, but not part of, the local government’s financial statements: and

in a form that is readily understood by the community.

In this section –

‚community financial report‛ means a report containing a summary and analysis of the local gover-ment’s financial performance and position for the financial year.

30

Celebrating One

31

Year of Service

32

33

Table of Contents

Note

Income Statement

Balance Sheet

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

1 Summary of Significant Accounting Policies

2 Analysis of results by function

3 Revenue analysis

4 Grants, subsidies, contributions and donations

5 Employee benefits

6 Materials and services

7 Finance costs

8 Depreciation and Amortisation

9 Gain on restructure of local government

10 Cash and cash equivalents

11 Trade and other receivables

12 Inventories

13 Equity investments

14 Property, Plant and Equipment

15 Capital work in progress

16 Trade and other payables

17 Borrowings

18 Loans

19 Finance leases

20 Provisions

21 Other liabilities

22 Shire Capital

23 Retained surplus

24 Capital and other reserves

25 Commitments for expenditure

26 Contingent liabilities

27 Events after balance date

28 Superannuation

29 Trust funds

30 Reconciliation of result from ordinary activities to net cash inflow (outflow)

31 Financial Risk Management

Management Certificate

Independent Audit Report

34

Income Statement

For the period 15 March 2008 to 30 June 2009

2009

Note $

Income

Revenue

Recurrent Revenue

Net rate and utility charges 3(a) 13,637

Fees and Charges 3(b) 1,402,522

Rental income 3(c) 3,732,305

Interest received 3(d) 663,815

Sales - Contract and recoverable works 3(e) 2,060,508

Profit from investments 3(f) -

Other recurrent income 3(g) 6,425,739

Grants, subsidies, contributions and donations 4(a) 51,064,847

Total recurrent revenue 65,363,374

Capital revenue

Grants, subsidies, contributions and donations 4(b) 13,053,276

Total revenue 78,416,650

Gain on restructure of local government

Assets and liabilities transferred from abolished Councils 9 254,555,946

Adjustments due to accounting policy alignment 9 319,269,769

573,825,715

Total income 652,242,365

Expenses

Employee benefits 5 (42,097,147)

Materials and services 6 (28,154,385)

Finance costs 7 (107,827)

Depreciation and amortisation 8 (27,621,778)

Total recurrent expenses (97,981,136)

Capital expenses

Impairment losses -

Provision for restoration of land (82,194)

Revaluation decrements -

(82,194)

Total expenses (98,063,330)

554,179,035 Net result attributable to Council

35

Balance Sheet

as at 30 June 2009

2009

Note $

ASSETS

Current Assets

Cash and cash equivalents 10 15,504,604

Trade and other receivables 11 13,266,174

Inventories 12 893,334

29,664,113

Total current assets 29,664,113

Non-current Assets

Investments 13 350,002

Property, plant and equipment 14 534,201,385

Capital works in progress 15 3,564,213

Total non-current assets 538,115,599

TOTAL ASSETS 567,779,712

LIABILITIES

Current Liabilities

Trade and other payables 16 7,948,908

Borrowings 17 105,166

Provisions 20 513,883

Other 21 1,516,065

Total current liabilities 10,084,022

Non-current Liabilities

Trade and other payables 16 356,534

Borrowings 17 557,612

Provisions 20 2,602,509

Total non-current liabilities 3,516,655

TOTAL LIABILITIES 13,600,677

NET COMMUNITY ASSETS 554,179,035

Community Equity

Shire capital 22 -

Retained surplus/(deficiency) 23 554,179,035

Other reserves 24 -

TOTAL COMMUNITY EQUITY 554,179,035

The above statement should be read in conjunction with the accompanying notes and Summary of Significant

Accounting Policies.

36

For the period 15 March 2008 to 30 June 2009

Shire Capital Retained

surplus

Capital and

Other

Reserves

Total

Notes 22 23 24

$ $ $ $

Period 15 March 2008 to 30 June 2009

Opening Balance - - - -

Revaluations of Property, Plant and Equipment - - - -

Available for sale investments:

Valuation gains/(losses) - - - -

Transferred to income statement on sale - - - -

Impairment Losses - - - -

Change in value of future rehabilitation cost - - - -

Net income recognised directly in equity - - - -

Surplus for the period - 554,179,035 - 554,179,035

Total recognised income and expense - 554,179,035 - 554,179,035

Transfers to and from reserves

Transfers to/from capital - - - -

Transfers to capital and other reserves - - - -

Transfers from capital and other reserves - - - -

Total transfers to and from reserves - - - -

Balance at 30 June 2009 - 554,179,035 - 554,179,035

37

For the period 15 March 2008 to 30 June 2009

2009

Cash flows from operating activities : Note $

Receipts from customers 5,867,698

Payments to suppliers and employees (65,986,831)

(60,119,133)

Dividend received -

Interest received 663,815

Rental income 3,732,305

Non capital grants and contributions 51,064,847

Income from investments -

Borrowing costs (58,132)

Net cash inflow (outflow) from operating activities (4,716,297)

Cash flows from investing activities:

Payments for property, plant and equipment (9,493,756)

Payments for intangible assets -

Net movement in loans and advances -

Proceeds from sale of property plant and equipment -

Grants, subsidies, contributions and donations 13,053,276

Net cash inflow (outflow) from investing activities 3,559,520

Cash flows from financing activities:

Proceeds from borrowings -

Repayment of borrowings (99,724)

Repayments made on finance leases (40,112)

Net cash inflow (outflow) from financing activities (139,836)

Net increase (decrease) in cash held (1,296,613)

Cash at beginning of reporting period -

Cash flow arising from restructure of local government 9 16,801,217

Cash at end of reporting period 10 15,504,604

38

Notes to and forming part of the

Financial Statements—Note 1 For the period 15 March 2008 to 30 June 2009

1 Summary of Significant Accounting Policies

1.A Basis of Preparation

This general purpose financial report has been prepared in accordance with Australian

Accounting Standards and complies with the requirements of the Local Government Act

1993, the Local Government Reform Implementation Regulation 2008, section 37 of the

Local Government (Community Government Areas) Act 2004 and the Local

Government (Community Government Areas) Finance Standard 2004 and the Local

Government Finance Standard 2005.

The Local Government Reform Commission report to the Minister for Local

Government, Planning and Sport on 27 July 2007 recommended that the former Badu

Island Council, Boigu Island Council, Dauan Island Council, Erub Island Council,

Hammond Island Council, Iama Island Council, Kubin Island Council, Mabuiag Island

Council, Mer Island Council, Poruma Island Council, Saibai Island Council, St. Pauls

Island Council, Ugar Island Council, Warraber Island Council, Yorke Island Council and

Island Co-ordinating Council be amalgamated to form Torres Strait Island Regional

Council. Pursuant to Part 1B of the Local Government Act 1993 and in accordance

with the Local Government Reform Implementation Regulation 2008, the Torres Strait

Island Regional Council was formed on 15 March 2008.

The Local Government Reform Implementation Regulation 2008 and the Local

Government Reform Implementation (Transferring Areas) Amendment Regulation

(No.1) 2008 transferred the assets and liabilities of the former Badu Island Council,

Boigu Island Council, Dauan Island Council, Erub Island Council, Hammond Island

Council, Iama Island Council, Kubin Island Council, Mabuiag Island Council, Mer Island

Council, Poruma Island Council, Saibai Island Council, St. Pauls Island Council, Ugar

Island Council, Warraber Island Council, Yorke Island Council and Island Co-ordinating

Councils to the Torres Strait Island Regional Council as at changeover date.

Pursuant to section 159YQ of the Local Government Act 1993 and sections 26 and 35

of the Local Government Reform Implementation Regulation 2008 , financial

statements have been prepared for the period starting on 15 March 2008 and ending

on 30 June 2009. Future periods will be for twelve month periods starting 1 July and

ending on 30 June.

Assets and liabilities of the former Councils have been recognised by Torres Strait

Island Regional Council on 15 March 2008 at the previous book values of the transferor

local governments with adjustments to non-current assets to reflect a valuation

undertaken as at that date. This is shown as income in the Income Statement and

details are disclosed in note 9.

Torres Strait Island Regional Council adopted consistent account ing policies to the

former Island Councils from its commencement date of 15 March 2008, except for the

recognition of provisions made in respect of the Councils landfill sites. In some cases,

this resulted in adjustments to the measurement of assets and liabilities transferred

from former Councils as at 15 March 2008. These accounting policy alignment

adjustments are shown in the Income Statement and details are disclosed in note 9.

This financial report has been prepared under the historical cost convention except for

the revaluation of certain non-current assets.

Indigenous Regional Councils (TSIRC

and NPARC) will need to add that the general purpose financial report has

been prepared in accordance with section 37 of the Local Government

(Community Government Areas) Act 2004 and the Local Government

(Community Government Areas) Finance Standard 2004.

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Indigenous Regional Councils (TSIRC

and NPARC) will need to add that the general purpose financial report has

been prepared in accordance with section 37 of the Local Government

(Community Government Areas) Act 2004 and the Local Government

(Community Government Areas) Finance Standard 2004.

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39

Notes to and forming part of the Financial State-

ments—Note 1

1.B Statement of Compliance

Australian Accounting Standards include Australian equivalents to International

Financial Reporting Standards (AIFRS). Because the Council is a not-for-profit entity

and the Australian Accounting Standards include requirements for not-for-profit ent ities

which are inconsistent with Internat ional Financial Reporting Standards (IFRS), to the

extent these inconsistencies are applied, this Report does not comply with IFRS. The

main impact is in:

- the offsetting of revaluation and impairment gains and losses within a class of assets;

and

- the recognition of assets and liabilities of the former Councils at the amounts at which

they were recognised by the transferor local governments.

1.C Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of all ent ities

controlled by the Torres Strait Island Regional Council (Council) as at 30 June 2009

and the results of all significant controlled entities for the period then ended. The

Council and its controlled ent ities together form the economic entity which is referred to

in this financial report as the consolidated ent ity.

In the process of reporting the Council as a single economic entity, all transactions with

ent ities controlled by the Council have been eliminated.

Torres Strait Island Regional Council owns the entire issued share capital of Poruma

Island Pty Ltd. The Council has determined that th is entity is not a significant controlled

ent ity and therefore the assets and liabilities and results of Poruma Island Pty Ltd have

not been reflected in these financial statements. There are no other controlled entities.

1.D Adoption of new Accounting Standards.

The following Australian Accounting Standards, issued on the dates shown, are not

mandatory for the period ending 30 June 2009 but, as permitted, have been applied in

preparing this report where applicable:

AASB 1004 Contributions (December 2007)

AASB 1051 Land Under Roads (December 2007)

AASB 1052 Disaggregated Disclosures (December 2007)

AASB 2007-9 Amendments to Australian Account ing Standards arising from the Review

of AASs 27, 29 and 31

AASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public

Sector Ent ities.

The fo llowing Australian Accounting Standards, issued on the dates shown, are not

mandatory for the period ending 30 June 2009 and have not been applied.

AASB3 Business Combinations (March 2008)

AASB8 Operating Segments (Feb 2007)

AASB101 Presentation of Financial Statements (September 2007)

AASB123 Borrowing Costs (June 2007)

AASB127 Consolidated and Separate Financial Statements (March 2008)

AASB 1039 Concise Financial Reports (August 2008)

AASB 2007-3 Amendments to Australian Account ing Standards arising from AASB8

(February 2007)

AASB2007-6 Amendments to Australian Accounting Standards arising from AASB123

(June 2007)

AASB 2007-8 Amendments to Australian Account ing Standards arising from AASB101

(September 2007)

AASB 2007-10 Further Amendments to Australian Accounting Standards arising from

AASB 101

AASB 2008-1 Amendments to Australian Account ing Standard - Share-based

Payments: Vesting Conditions and Cancellations (February 2008)

AASB2008-2 Amendments to Account ing Standards - Puttable Financial Instruments

and Obligat ions arising on Liquidation (March 2008)

AASB2008-3 Amendments to Account ing Standards arising from AASB3 and AASB127

(March 2008)

The standards disclosed will need to be

updated if any new standards have been published between the preparation

of Tropical and the finalisation of the financial statements. If council decides

to early implement any Australian Accounting Standards this should be

disclosed at this point.

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The standards disclosed will need to be updated if any new standards have

been published between the preparation of Tropical and the finalisation of the

financial statements. If council decides to early implement any Australian

Accounting Standards this should be disclosed at this point.

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40

Notes to and forming part of the Financial

Statements—Note 1

AASB2008-5 Amendments to Australian Accounting Standards arising from the Annual

Improvements Project (July 2008)

AASB2008-6 Further Amendments to Australian Accounting Standards arising from the

Annual Improvements Project

AASB 2008-7 Amendments to Australian Account ing Standards – Cost of an

Investment in a Subsidiary, Jointly Controlled Entity or Associate (July 2008)

AASB2008-8 Amendments to Australian Accounting Standards - Eligible Hedged Items

[AASB 139] (August 2008)

AASB 2008-9 Amendments to AASB 1049 for Consistency with AASB 101(September

2008)

AASB 2008-11 Amendments to Australian Accounting Standard – Business

Combinations Among Not-for-Profit Entit ies [AASB 3] (November 2008)

AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB

Interpretat ion 17 – Distributions of Non-cash Assets to Owners (December 2008)

[AASB 5 & AASB 110]

Interpretat ion 15 - Agreements for the Construction of Real Estate (August 2008)

Interpretat ion 16 - Hedges of a Net Investment in a Foreign Operation (August 2008)

Interpretat ion 17 – Distributions of Non-cash Assets to Owners (December 2008)

It is not expected that the new standards would have made a substantial difference to

the results if they had applied to this accounting period. Most of the changes are

matters of presentation.

1.E Critical accounting estimates

The preparation of f inancial statements in conformity with AIFRS requires the use of

certain critical accounting est imates. It also requires management to exercise its

judgement in the process of applying the Council's accounting policies. Estimates and

judgements are based on historical experience and other factors, including

expectations of future events that may have a financial impact on the Council and that

are believed to be reasonable under the circumstances.

The estimates and assumptions that have the potential to cause a material adjustment

to the carrying amounts of assets and liabilities within the next financial year are

referred to in the appropriate notes to the financial statements.

1.F Currency

The Council uses the Australian Dollar as its functional currency and its presentation

currency.

1.G Constitution

The Torres Strait Island Regional Council is constituted under the Queensland Local

Government Act 1993 and is domiciled in Australia.

1.H Date of authorisation

The financial report was authorised for issue on the date it was submitted to the

Auditors for final signature.

The Local Government has the power to amend the Financial Report af ter it is

authorised for issue until the adoption of the report by the Local Government as part of

the Annual Report.

1.I Changes to Accounting Policies, Estimates and Errors

Unless otherwise stated, accounting policies have been consistently applied throughout

the period.

Where the impending accounting

standard will have an effect on the financial report this will need to be

disclosed. For example, if any councils have elected to expense all borrowing

costs, as previously permitted by AASB 123, this option will no longer be allowed

in future years when all borrowing costs for qualifying assets must be capitalised.

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Where the impending accounting

standard will have an effect on the financial report this will need to be

disclosed. For example, if any councils

have elected to expense all borrowing costs, as previously permitted by AASB 123, this option will no longer be allowed

in future years when all borrowing costs for qualifying assets must be capitalised.

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41

Notes to and forming part of the Financial

Statements—Note 1

1.J Rates, Grants and Other Revenue

Rates, Grants and Other Revenue are recognised as revenue on receipt of funds or

earlier uncondit ional entitlement to the funds.

(i) Rates

Where rate monies are received prior to the commencement of the rating period, the

amount is recognised as revenue in the period in which they are received.

(ii) Grants and Subsidies

Where the Council has an obligation to use a grant or subsidy in a particular manner

the amount is recognised as revenue on receipt. An equivalent amount is placed in a

reserve until the obligation is satisfied.

(iii) Non-Cash Contributions

Non-cash contributions with a value in excess of the recognition thresholds set out in

note 1.R, are recognised within revenue as a donated asset and as non-current assets.

Non-cash contributions below the thresholds are recorded as revenue and expenses.

(iv) Other Revenue Including Contributions

Other Revenue is recognised as a receivable when it is probable that it will be received

and the amount is known, otherwise the amount is recognised upon receipt.

1.K Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, all cash and cheques receipted but

not banked at the year end, deposits held at call with financial institutions, other short-

term, highly liquid investments with original maturities of three months or less that are

readily convertible to known amounts of cash and which are subject to an insignificant

risk of changes in value, and bank overdrafts.

1.L Receivables

Trade receivables are recognised initially at fair value due at the time of sale or service

delivery and subsequently measured at amortised cost using the effective interest

method, less provision for impairment. Settlement of these amounts is required within

30 days from invoice date.

The collectability of receivables is assessed periodically and, if there is objective

evidence that Council will not be able to collect all amounts due, the carrying amount is

reduced with provision being made for impairment. The loss is recognised in other

expenses.

The amount of the provision is the difference between the asset’s carrying amount and

the present value of the estimated cash flows, discounted at the effective interest rate.

Increases in the provision for impairment are based on loss events.

Loans and advances are recognised in the same way as other receivables. Terms are

usually a maximum of five years with interest charged at commercial rates. Security is

not normally obtained.

1.M Other Financial Assets

Other Financial Assets are recognised at cost.

42

Notes to and forming part of the Financial

Statements—Note 1

1.N Financial Assets and Financial Liabilities

Categorisation

Torres Strait Island Regional Council has categorised the financial assets and financial

liabilities held at balance date as follows:

Financial Assets

Cash

Shares - Financial assets available for sale (at cost)

Receivables - Loans and receivables (at amortised cost)

Other financial assets

Financial Liabilities

Payables - Financial liability (at cost)

Borrowings - Financial liability (at amortised cost)

Finance Lease liabilities - Financial liability (at amortised cost)

Financial assets and financial liabilities are presented separately from each other,

offsetting has not been applied.

The fair value of financial assets and liabilities must be estimated for recognition and

measurement and for disclosure purposes.

The fair value of financial assets and liabilities is determined as follows:

The fair value of cash and cash equivalents and non-interest bearing monetary financial

assets and financial liabilities approximate their carrying amounts and are not disclosed

separately.

The fair value of borrowings, as disclosed in note 18 to the accounts, is determined by

reference to published price quotations in an active market and/or by reference to

pricing models and valuation techniques. It reflects the value of the debt if the Council

repaid it in full at balance date. As it is the intention of the Council to hold its

borrowings for their full term, no adjustment provision is made in these accounts.

The fair value of other monetary financial assets and financial liabilities is based on

market prices where a market exists, or is determined by discounting expected future

cash flows by the current interest rate for financial assets and liabilities with similar risk

profiles.

The fair value of trade receivables and payables are assumed to approximate their

nominal value less estimated credit adjustments.

The fair value of prepayments is represented by the book value as the period of time to

consumption is short and there are no rates involved in the calculat ion, therefore they

are not disclosed separately.

Available for sale financial assets are measured at cost, as fair value cannot be reliably

measured, therefore no fair value is disclosed.

43

Notes to and forming part of the Financial

Statements—Note 1

1.O Inventories

Stores, raw materials and water held for resale are valued at the lower of cost and net

realisable value and include, where applicable, direct material, direct labour and an

appropriate portion of variable and fixed overheads. Costs are assigned on the basis of

weighted average cost.

Inventories held for distribut ion are:

• goods to be supplied at no, or nominal, charge, and

• goods to be used for the provision of services at no, or nominal, charge.

These goods are valued at cost, adjusted, when applicable, for any loss of service

potential.

1.P Investments

Financial institution deposits at call and term deposits with a short maturity of three

months or less are treated as cash equivalents.

Interest and dividend revenues are recognised on an accrual basis.

The controlled entity is accounted for at cost in the Council's financial statements.

Torres Strait Island Regional Council hold 100% of the shares in the controlled entity.

1.Q Investment Property

Investment property is property held for the primary purpose of earning rentals and/or

capita l appreciation, and primarily consists of the social welfare housing portfolio. This

includes property held by the Council without any specific purpose (such as land no

longer required for its original purpose).

Investment property is measured using the fair value model. This means it is in itia lly

recognised at cost including transaction costs. Where investment property is acquired

at no or nominal cost it is recognised at fair value. Investment property transferred from

the former Badu Island Council, Boigu Island Council, Dauan Island Council, Erub

Island Council, Hammond Island Council, Iama Island Council, Kubin Island Council,

Mabuiag Island Council, Mer Island Council, Poruma Island Council, Saibai Island

Council, St. Pauls Island Council, Ugar Island Council, Warraber Island Council, Yorke

Island Council and Island Co-ordinating Councils was initially recognised at the amount

at which it was recognised by the former Councils as disclosed in Note 1.A and Note 9.

All Investment property is subsequently revalued annually at the balance sheet date.

Gains or losses arising from changes in the fa ir value of investment property are

included in the income statement for the period in which they arise. Investment property

is not depreciated and is not tested for impairment.

Rental revenue from investment property is recognised as income on a periodic straight

line basis over the lease term.

1.R Property, Plant and Equipment

Each class of property, plant and equipment is stated at cost or fair value less, where

applicable, any accumulated depreciation and accumulated impairment loss. I tems of

plant and equipment with a total value of less than $5,000, and infrastructure assets,

and buildings with a total value of less than $10,000 are treated as an expense in the

year of acquisition. All other items of property, plant and equipment are capitalised.

The classes of property, plant and equipment recognised by the Council are:

Land

Build ings (Community and Corporate)

Wharves, Jetties and Pontoons

Plant and equipment

Road transport, stormwater and flood mitigation network

Water

Sewerage

Other infrastructure assets including recreational facilities

Accounting policies adopted are consistent with those of the

Accounting policies adopted are consistent with those of the

44

Notes to and forming part of the Financial

Statements—Note 1

(i) Acquisition of Assets

Acquisitions of assets are in itia lly recorded at cost. Cost is determined as the fair value

of the assets given as considerat ion plus costs incidental to the acquisition, including

freight in, architect's fees and engineering design fees and all other establishment

costs.

Non-monetary assets, including property, plant and equipment, received in the form of

contributions are recognised as assets and revenues at fa ir value by Council valuation

where that value exceeds the recognition thresholds for the respective asset class. Fair

value means the amount for which an asset could be exchanged, or a liability settled,

between knowledgeable, willing parties in an arm's length transaction.

Non-current assets transferred from the former Badu Island Council, Boigu Island

Council, Dauan Island Council, Erub Island Council, Hammond Island Council, Iama

Island Council, Kubin Island Council, Mabuiag Island Council, Mer Island Council,

Poruma Island Council, Saibai Island Council, St. Pauls Island Council, Ugar Island

Council, Warraber Island Council, Yorke Island Council and Island Co-ordinating

Councils, as a result of a Government restructure, were initially recognised at the

amount at which they were recognised by the former Councils as at the changeover

day as disclosed in Note 1.A and Note 9, and subsequently revalued as at the same

date. Those assets are reflected as additions at valuation in Note 14.

(ii) Capital and operating expenditure

Wage and materials expenditure incurred for the acquisition or construction of assets

are treated as capital expenditure. Routine operating maintenance, repair costs and

minor renewals to maintain the operational capacity of the non-current asset is

expensed as incurred, while expenditure that relates to replacement of a major

component of an asset to enhance its service potential is capitalised.

(iii) Valuation

Land and improvements, buildings, plant and equipment and all infrastructure assets

are measured on the revaluation basis, at fair value, in accordance with AASB116

Property, Plant and Equipment and the Local Government Finance Standard 2005.

Other plant and equipment is measured at cost.

Non-current physical assets measured at fair value are revalued where required so that

the carrying amount of each class of asset does not materially differ from its fair value

at the reporting date. This is achieved by comprehensively revaluing these assets at

least once every f ive years with interim valuations, using a suitable index, being

otherwise performed on an annual basis where there has been a material variation in

the index.

Any revaluation increment arising on the revaluation of an asset is credited to the asset

revaluation reserve of the appropriate class, except to the extent it reverses a

revaluation decrement for the class previously recognised as an expense. A decrease

in the carrying amount on revaluation is charged as an expense, to the extent it

exceeds the balance, if any, in the revaluation reserve relating to that asset class.

On revaluation, accumulated depreciation is restated proportionately with the change in

the carrying amount of the asset and any change in the estimate of remaining useful

Separately identified components of assets are measured on the same basis as the

assets to which they relate.

Details of valuers and methods of valuations are disclosed in Note 14.

45

Notes to and forming part of the Financial

Statements—Note 1

(iv) Depreciation

Land is not depreciated as it has an unlimited useful life. Depreciation on other

property, plant and equipment is calculated on a straight-line basis so as to write-off the

net cost or revalued amount of each depreciable asset, less its estimated residual

value, progressively over its estimated useful life to the Council.

Assets are depreciated from the date of acquisition or, in respect of internally

constructed assets, from the time an asset is completed and commissioned ready for

use.

Where assets have separately identifiable components that are subject to regular

replacement, these components are assigned useful lives distinct from the asset to

which they relate. Any expenditure that increases the originally assessed capacity or

service potential of an asset is capitalised and the new depreciable amount is

depreciated over the remaining useful life of the asset to the Council.

Major spares purchased specifically for particular assets that are above the asset

recognition threshold are capitalised and depreciated on the same basis as the asset to

which they relate.

The depreciable amount of improvements to or on leasehold land is allocated

progressively over the estimated useful lives of the improvements to the Council or the

unexpired period of the lease, whichever is the shorter.

The estimated useful lives of property, p lant and equipment are reviewed annually.

Details of the range of useful lives for each class of asset are shown in note 14.

(v) Unfunded Depreciation

Torres Strait Island Regional Council has elected not to fund depreciation expenses for

assets that will not be replaced or where external funding sources other than loans will

be obtained to fund their replacement. Where grant income allows for it, depreciation is

funded to the extent necessary to meet future replacement capital works.

(vi) Land Under Roads

The Torres Strait Island Regional Council does not control any land under roads. All

land under the road network within the Council area has been dedicated and opened

for public use under the Land Act 1994 or the Land Title Act 1994 and is not controlled

by Council but is controlled by the State pursuant to the relevant legislation. Therefore

this land is not recognised in these financial statements.

This note will only be applicable to the Northern Peninsula Regional Council

and the Torres Strait Regional Council

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The wording of this note will depend on

46

Notes to and forming part of the Financial

Statements—Note 1

(vii) Deed of Grant in Trust land

The Council is located on land assigned to it under various Deeds of Grant in Trust

(DOGIT) pursuant to section 334 of the Land Act 1962. The land comprises a total

area of approximately 483.6 sq km, across the following islands:

Badu Island

Boigu Island

Dauan Island

Erub Island

Hammond Island

Iama Island

Moa Island

Mabuiag Island

Poruma Island

Saibai Island

Ugar Island

Warraber Island

Yorke Island

The land is administered by the Department of Environment and Resource

Management and the Council has restricted use of this land for the benefit of Island

inhabitants. The DOGIT land has not been taken up in the Council's assets as it cannot

be reliably measured.

1.S Intangible Assets

Only intangible assets which have a cost exceeding $10,000 are recognised as

intangible assets.

Expenditure on internally generated intangible assets is recognised from the date of the

approval by the Council of a capital expenditure authorisation for the acquisition or

development of the asset as before approving the expenditure Council requires it to

meet conditions which equal or exceed the criteria for recognition in AASB138.57.

Expenditure on internally generated assets, up to the decision to generate the asset in

a particular form, is research expenditure and is not capitalised.

It has been determined that there is not an active market for any of the Council's

intangible assets. Therefore, the assets are recognised and carried at cost less

accumulated amortisation and accumulated impairment losses.

1.T Capital Work in Progress

The cost of property, p lant and equipment being constructed by the Council includes

the cost of purchased services, materials, direct labour and an appropriate proportion of

labour overheads.

1.U Biological Assets

The Council operates a nursery to produce bedding plants and trees for its own use. In

view of the immaterial nature of th is operation the account ing procedures related to

biological assets have not been applied. The costs incurred in this operation are

included in Council's general operations as they are incurred.

The wording of this note will depend on

the final structure of the water reform entities and will therefore need to be

This note will only be applicable to the Northern Peninsula Regional Council

and the Torres Strait Regional Council

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Councils need to comply with AASB 141 for the first time this year. If this has resulted in a change in accounting

policy relevant disclosure should be made at Note 1I. AASB 141 has specific disclosure requirements that have not been included in this illustrative set of financial statements.

Affected councils will need to make the relevant disclosures in financial statements.

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47

Notes to and forming part of the Financial

Statements—Note 1

1.V Impairment of Non Current Assets

Each non-current physical and intangible asset and group of assets is assessed for

indicators of impairment annually. If an indicator of possible impairment exists, the

Council determines the asset's recoverable amount. Any amount by which the asset's

carrying amount exceeds the recoverable amount is recorded as an impairment loss.

The asset's recoverable amount is determined as the higher of the asset's fa ir value

less costs to sell and depreciated replacement cost.

An impairment loss is recognised immediately in the Income Statement, unless the

asset is carried at a revalued amount. When the asset is measured at a revalued

amount, the impairment loss is offset against the asset revaluation reserve of the

relevant class to the extent available.

Where an impairment loss subsequently reverses, the carrying amount of the asset is

increased to the revised estimate of its recoverable amount, but so that the increased

carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset in prior years. A

reversal of an impairment loss is recognised as income, unless the asset is carried at a

revalued amount, in which case the reversal of the impairment loss is treated as a

revaluation increase.

1.W Leases

Leases of plant and equipment under which the Council as lessee assumes

substantially all the risks and benefits incidental to the ownership of the asset, but not

the legal ownership, are classified as finance leases. Other leases, where substantially

all the risks and benefits remain with the lessor, are classified as operating leases.

(i) Finance leases

Finance leases where the Council is lessee are capitalised in that a lease asset and a

liability equal to the fair value of the leased property (or the present value of the

minimum lease payments, if lower) are recorded at the incept ion of the lease. Lease

liabilities are reduced by repayments of principal. The interest components of the lease

payments are charged as finance costs The asset is accounted for on the same basis

as other assets of the same class. Contingent rentals are written off as an expense in

the accounting period in which they are incurred.

(ii) Operating leases

Payments made under operating leases are expensed in equal instalments over the

accounting periods covered by the lease term, except where an alternative basis is

more representative of the pattern of benefits to be derived from the leased property.

1.X Payables

Trade creditors are recognised upon receipt of the goods or services ordered and are

measured at the agreed purchase/contract price net of applicable discounts other than

contingent discounts. Amounts owing are unsecured and are generally sett led on 30

day terms.

This note will only be applicable to the

Northern Peninsula Regional Council and the Torres Strait Regional Council

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The wording of this note will depend on the final structure of the water reform

entities and will therefore need to be reviewed closer to the date of finalising

the Statements.

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in financial statements.

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48

Notes to and forming part of the Financial

Statements—Note 1

1.Y Liabilities - Employee Benefits

Liabilities are recognised for employee benefits such as wages and salaries, annual

leave and long service leave in respect of services provided by the employees up to the

reporting date. L iabilit ies for employee benefits are assessed at each reporting date.

Where it is expected that the leave will be taken in the next twelve months the liability is

treated as a current liability. Otherwise the liability is treated as non-current.

(i) Salaries and Wages

A liability for salaries and wages is recognised and measured as the amount unpaid at

the reporting date at current pay rates in respect of employees' services up to that date.

(ii) Annual Leave

A liability for annual leave is recognised. The current portion (based on the expected

payment date) is calculated on current wage and salary levels and includes related

employee on-costs. The non current portion is calculated on projected future wage and

salary levels and related employee on-costs, discounted to present values. This liability

represents an accrued expense and is reported in Note 16 as a payable.

(iii) Sick Leave

Council has an obligation to pay sick leave on termination to certain employees and

therefore a liability has been recognised for this obligat ion.

(iv) Superannuation

The superannuation expense for the reporting period is the amount of the contribution

the local government makes to the superannuation plan which provides benefits to its

employees.

Details of those arrangements are set out in Note 28.

(v) Long Service Leave

A liability for long service leave is measured as the present value of the estimated

future cash outflows to be made in respect of services provided by employees up to the

reporting date. The value of the liability is calculated using current pay rates and

projected future increases in those rates and includes related employee on-costs. The

estimates are adjusted for the probability of the employee remaining in the Council's

employment or other associated employment which would result in the Council being

required to meet the liability. Adjustments are then made to allow for the proport ion of

the benefit earned to date, and the result is discounted to present value. The interest

rates attaching to Commonwealth Government guaranteed securities at the reporting

date are used to discount the estimated future cash outflows to their present value.

This liability is reported in Note 20 as a provision.

1.Z Borrowings

Loans payable are measured at amort ised cost using the effective interest rate method.

The effective interest rate is the rate that exactly discounts estimated future cash

payments or receipts through the expected life of the financial instrument.

Borrowing costs, which includes interest calculated using the effective interest method

and administrat ion fees, are expensed in the period in which they arise. Costs that that

are not settled in the period in which they arise are added to the carrying amount of the

borrowing.

Borrowing costs are treated as an expense, as assets constructed by the Council are

generally completed within one year and therefore are not considered to be qualifying

assets.

Gains and losses on the early redemption of borrowings are recorded in other revenue /

expense.

Borrowings are classified as current liabilities unless the Council has an unconditional

right to defer settlement of the liability for at least 12 months after the balance sheet

date.

Councils need to comply with AASB 141 for the first time

this year. If this has resulted in a change in accounting policy relevant disclosure should be made at Note 1I. AASB 141 has specific disclosure requirements that have not been

included in this illustrative set of financial statements. Affected councils will need to make the relevant disclosures

in financial statements.

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As a result of changes to the accounting standards, new QTC borrowings now have to be measured on an amortised cost basis.Councils which used the Fair Value basis for 2005continue to do so for the original instrument but any new borrowing must be measured at amortised cost.See AASB139.47 and part b of the definition of "or financial liability at fair value through profit or lossAASB139.9.

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49

Notes to and forming part of the Financial

Statements—Note 1

1.AA Restoration Provision

A provision is made for the cost of restorat ion of assets and other future restoration

costs where it is probable the Council will be liable, or required, to incur such a cost on

the cessation of use of the facility. This liability is provided in respect of the landfill sites

on each of the islands under Council responsibility. No such provision is deemed

necessary in respect of the Quarry on the basis of the extended life of that facility and

uncertainty of the future costs of rehabilitation of that site.

The provision is measured at the expected cost of the work required discounted to

current day values using an appropriate rate. The current QTC lending rate is

considered an appropriate rate.

Gravel pits are land. The cost of the restoration provision is therefore be added to the

cost of the land as an improvement and amortised over the expected useful life of the

pit. Changes in the provision not arising from the passing of time are added to or

deducted from the asset revaluation reserve for land. If there is no available reserve

increases in the provision are treated as an expense and recovered out of future

decreases if any.

Changes to the provision resulting from the passing of time (the unwinding of the

discount) are treated as a finance cost.

1.AB Asset Revaluation Reserve

The asset revaluation reserve comprises adjustments relating to changes in value of

property, plant and equipment that do not result from the use of those assets. Net

incremental changes in the carrying value of classes of non-current assets since their

initial recognition are accumulated in th is reserve.

Increases and decreases on revaluation are offset within a class of assets.

Where a class of assets is decreased on revaluation, that decrease is offset first

against the amount remaining in the asset revaluation reserve in respect of that class.

Any excess is treated as an expense.

When an asset is disposed of the amount in the reserve in respect of that asset is

retained in the reserve.

1.AC Reserves

The following reserves have been established by Council at 30 June 2009 and are

expected to be utilised in the future. They are cash backed reserves and represent

funds that are accumulated within the Council to meet anticipated future needs. In

each case the amount relates to a perceived future requirement which is not currently a

liability. At 30 June 2009 no such funds have been reserved under any of the headings,

with future transfers to these reserves made from surplus funds arising in a particular

financial year.

(i) Operating Reserve

This reserve represents amounts set aside for any initiative on the island.

(ii) Operating Reserve - Natural Disaster

This reserve represents amounts set aside to fund significant repairs and rehabilitation

to assets damaged due to natural disaster.

(iii) Operating Reserve - Plant and Fleet Replacement

This reserve represents constrained surpluses generated from plant operations and

used to fund plant replacement and upgrades.

As a result of changes to the accounting standards, new QTC borrowings now have to be measured on an amortised cost basis.

The view of QAO is that where there is no underlying tangible asset the cost of a restoration provision does not

constitute an asset.

Where there is an underlying asset the cost must be dealt with in accordance with AASB116.11 and Interpretation1.

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50

Notes to and forming part of the Financial

Statements—Note 1

1.AD Retained Surplus

This represents the amount of Council's net community equity not set aside in reserves

to meet specific future needs.

1.AE National Competition Policy

Council has not applied National Competition Policy reform to any of its activit ies.

1.AF Rounding and Comparatives

Amounts included in the financial statements have been rounded to the nearest $1.

Comparative figures have not been provided as Torres Strait Island Regional Council

commenced operation on 15 March 2008 and the financial statements cover the period

15 March 2008 to 30 June 2009.

1.AG Financial Risk Management

The Council minimises its exposure to financial risk in the following ways:

Investments in financial assets are only made where those assets are with a bank or

other f inancial institution in Australia and are for a period of less than one year.

The Council does not invest in derivatives or other high risk investments.

When the Council borrows, it borrows from the Queensland Treasury Corporation

unless another financial institution can offer a more beneficial rate, taking into account

any risk. Borrowing by the Council is constrained by the provisions of the Statutory

Bodies Financial Arrangements Act 1982.

Details of financial instruments and the associated risks are shown at note 31.

1.AH Judgements and Assumptions

The Council has made no judgements or assessments which may cause a material

adjustment to the carrying amounts of assets and liabilities within the next reporting

period.

1.AI Trust Funds Held for Outside Parties

Funds held in the Trust Account on behalf of outside parties include those funds from

the sale of land for arrears in rates, deposits for the contracted sale of land, security

deposits lodged to guarantee performance, funeral funds and unclaimed monies (e.g.

wages) paid into the Trust Account by the Council. The Council performs only a

custodian role in respect of these monies and because the monies cannot be used for

Council purposes, they are not considered revenue nor brought to account in the

financial statements.

The monies are disclosed in the notes to the financial statements for information

purposes only.

For details see note 29.

The view of QAO is that where there is no underlying tangible asset the cost of a restoration provision does not

constitute an asset.The Tropical Regional Council Report is presented in $ as this makes it easier to trace the impact of particular items. However, it is recommended that local government financial reports are rounded to the nearest thousand dollars in which case the adjoining note will need to be amended.

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51

Notes to and forming part of the Financial

Statements—Note 1

1.AJ Taxation

Income of local authorities and public authorities is exempt from Commonwealth

taxation except for Fringe Benefits Tax and Goods and Services Tax (‘GST’). The net

amount of GST recoverable from the ATO or payable to the ATO is shown as an asset

or liability respectively.

The controlled entity of the Council pays an income tax equivalent to the Council in

accordance with the requirements of the Local Government Act 1993 .

Where an activity of the controlled entity of the Council is subject to the Tax Equivalents

Regime, the income tax expense is calculated on the operating surplus adjusted for

permanent differences between taxable and accounting income. These transactions are

eliminated upon consolidat ion.

The Council pays Payroll Tax to the Queensland Government on certain activities.

The Tropical Regional Council Report is presented in $ as this makes it easier to trace the impact of particular items. However, it is recommended that local government financial reports are rounded to the nearest thousand dollars in which case the adjoining note will need to be amended.

Only if applicable

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2

Ana

lysi

s of

res

ults

by

func

tion

Inco

me

and

expe

nses

def

ined

bet

wee

n re

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ing

and

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re a

ttri

bute

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the

follo

win

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nctio

ns :

(a)

Peri

od e

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30

June

200

9

Func

tions

Gro

ss p

rogr

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To

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Gro

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inat

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sult

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s

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tribu

tabl

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trans

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nsac

tions

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nsto

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ncil

2009

2009

2009

2009

2009

2009

2009

2009

2009

2009

2009

$$

$$

$$

$$

$$

$

Cor

pora

te G

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e-

-

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(6

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43

6,65

1

(6

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(6

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(6,2

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4,27

9,02

9

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6,59

1,79

5

(9

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)

60

2,38

5

(8

,620

,797

)

(4

,341

,768

)

(2,0

29,0

02)

15,6

23,0

72

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sing

& P

orts

5,06

6,59

4

7,

236,

246

12,3

02,8

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(1

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1,20

2,75

1

(17,

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720)

(1

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6)

(4

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,880

)

30

1,06

2,59

1

Fina

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7,41

2

1,

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412

6,79

5,26

0

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1,68

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6

2,

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428

2,

947,

428

6,04

6,39

1

Cor

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te S

ervi

ces

22,4

33,3

34

41

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22,4

74,8

34

(1

7,62

1,48

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1,15

0,89

5

(16,

470,

589)

5,

962,

745

6,

004,

245

16,5

77,0

31

Com

mun

ity S

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26,4

93,3

54

94

8,72

4

27,4

42,0

78

(2

6,45

6,28

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-

(2

6,45

6,28

5)

37,0

69

985,

793

20

,066

,719

Engi

neer

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5,82

3,65

1

2,

514,

040

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7,69

1

(2

6,37

4,36

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(82,

194)

1,72

2,56

3

(24,

733,

991)

(1

8,82

8,14

6)

(1

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6,30

0)

174,

772,

818

-

-

-

-

Tota

l Cou

ncil

65,3

63,3

74

13

,053

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78

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(97,

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136)

(8

2,19

4)

-

(98,

063,

330)

(3

2,61

7,76

2)

(1

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534,

201,

385

Con

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-

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65,3

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78

,416

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(97,

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-

(98,

063,

330)

(3

2,61

7,76

2)

(1

9,64

6,68

0)

534,

201,

385

Notes to and forming part of the Financial

Statements—Note 2 (b)

2 Analysis of results by function (continued)

(b) Components of Council functions

The activities relating to the Council's components reported on in Note 2(a) and 2(b) are as follows :

Governance

This comprises the support functions for the Mayor and Councillors, Council and committee meetings and

statutory requirements. The key components of the Governance function also include Internal Audit and

Human Resources.

Economic & Tourism Development

The objective of the Economic and Tourism Development function provides the basis for the Torres Strait to

leverage of its comparative advantage associated with its natural environment.

Housing & Ports

The outcomes achieved from the Housing and Ports function provides for a base level of standard of living for

all communities associated with the Housing component whilst the Airports / Seaports are managed to provide

greater community access / choice of transportation services.

Finance

The outcomes achieved from the Finance function provides the Council and Community with risk management

strategy setting, internal controls and effective resource management.

Corporate Services

The outcomes achieved from the Corporate Services function provides the Council and Community with

improvement in the quality of services provided by the Council to Community through reduction in waste and

implementation of best practice systems.

Community Services

The outcomes achieved by Community Services are linked with the Council's commitment to public health,

recreational opportunities, the arts and community development.

Engineering

The outcomes achieved by Engineering Services are linked with Council's commitment to public health,

transport, water and wastewater infrastructure.

54

Notes to and forming part of the Financial

Statements—Note 3

For the period 15 March 2008 to 30 June 2009

2009

Note $

Notes on the Income Statement

3 Revenue analysis

(a) Rates and charges

General rates -

Separate rates -

Water -

Water consumption, rental and sundries 6,819

Sewerage -

Sewerage trade waste -

Waste management 6,819

Garbage charges -

Total rates and utility charge revenue 13,637

Less: Discounts -

Less: Pensioner remissions -

Net rates and utility charges 13,637

(b) Fees and charges

Fees and Charges 1,402,522

1,402,522

( c) Rental income

Investment property rentals 3,732,305

3,732,305

(d) Interest received

Interest received from term deposits -

Other sources 663,815

Interest from overdue rates and utility charges -

663,815

(e) Sales - Contract and recoverable works

Sales - Contract and recoverable works 2,060,508

2,060,508

(f) Profit from investments

Profit from associates and other joint ventures -

-

(g) Other recurrent income

Dividend -

Trading income from Enterprise activities 6,149,772

Other Income 275,967

6,425,739

55

Notes to and forming part of the Financial

Statements—Note 4

4 Grants, subsidies, contributions and donations

(a) Recurrent grants and subsidies, other contributions and donations are analysed as follows:

General purpose grants 33,606,195

State Government subsidies & grants 17,458,652

Donations -

Contributions -

Total recurrent revenue 51,064,847

(b) Capital government grants and subsidies, and other contributions are analysed as follows:

State Government subsidies & grants 11,739,711

General purpose grants 1,313,565

Total capital revenue 13,053,276

( c) Conditions over contributions

Contributions and grants which were recognised as revenues during the

reporting period and which were obtained on the condition that they be

expended in a manner specified by the contributor but had not been

expended at the reporting date.

Grants for expenditure on infrastructure -

Contributions for infrastructure -

-

Contributions and grants which were recognised as revenues during a

previous reporting period and were expended during the current reporting

period in accordance with the Council's obligations.

Grants expended on infrastructure 13,053,276

Contributions expended on infrastructure -

13,053,276

56

Notes to and forming part of the Financial

Statements—Note(s) 5, 6, 7 and 8

5 Employee benefits

Total staff wages and salaries 34,411,515

Councillors' remuneration 1,109,433

Annual, sick and long service leave entitlements 4,391,295

Superannuation 28 1,026,360

40,938,604

Other employee related expenses 1,615,514

42,554,118

Less : Capitalised employee expenses (456,971)

42,097,147

Councillor remuneration represents salary, and other allowances paid in respect of

carrying out their duties

Total Council employees at the reporting date:

Number

Elected members 16

Ordinary staff (full time equivalents) 407

Community Development Employment Programme Participants 1,502

Total full time equivalent employees 1,925

6 Materials and services $

Advertising and marketing 14,709

Administration supplies and consumables 9,780,369

Audit services 666,863

Communications and IT 388,032

Consultants 141,801

Contractors 1,507,258

Donations paid 13,875

Investment Property Expenses (property generating income) -

Investment Property Expenses (property not generating income) -

Power 1,117,486

Repairs and maintenance 9,368,244

Rentals - Operating leases 72,002

Subscriptions and registrations 215,421

Town Plan -

Travel 507,134

Other material and services 4,361,191

28,154,385

7 Finance costs

Finance costs charged by the Queensland Treasury Corporation 47,172

Interest on finance leases 10,960

Bank charges 49,695

107,827

8 Depreciation and Amortisation

(a) Depreciation of non-current assets

Buildings (Community) 10,343,082

Buildings (Corporate) 2,961,414

Recreation Facilities 380,771

Roads/Transport Network 2,384,417

Stormwater Drainage Network 27,287

Flood Mitigation Network 74,926

Water Supply Network 2,818,095

Sewerage Network 4,797,745

Wharves, Piers, Jetties and Pontoons 512,504

Plant and Equipment 3,321,537

57

Notes to and forming part of the Financial

Statements—Note 8 (c)

Unfunded Depreciation

( c) Accumulated Unfunded Depreciation

The accumulated un-funded depreciation represents the accumulated shortfall in funding being

provided from operating revenue to replace the assets at some future time.

It is anticipated external borrowings will be required as the assets are replaced resulting in higher

future operating costs. Recognition of un-funded depreciation represents a decline in the capital

value of the shire.

Net adjusted unfunded depreciation is calculated by taking the gross unfunded depreciation

and deducting the amount of depreciation that will not require funding due to either

non-replacement of the asset, contributions becoming available for funding the replacement,

the replacement asset will cost less than the existing asset, or the engineers assessment of

depreciation funding is less than the depreciation expense in the period.

The gross unfunded depreciation can be analysed as follows:

Road, Drainage and Bridge Network 2,387,914

Buildings 13,304,497

Recreation facilities 380,771

Water and wastewater drainage network 8,228,590

Wharves, jetties and pontoons 512,504

Plant & equipment 2,807,504

27,621,778

There is no difference between the gross and net unfunded depreciation on the basis that assets have

only been valued and subsequently depreciated if they represent a future requirement of the Council

to maintain and replace.

No

tes

to a

nd

fo

rmin

g p

art

of

the F

inan

cial Sta

tem

en

ts—

No

te 9

9G

ain

on r

estructure o

f local governm

ent

The L

ocal G

overnm

ent R

efo

rm

Com

mis

sio

n r

eport to

the M

inis

ter for L

ocal G

overnm

ent, P

lannin

g a

nd S

port on 2

7 J

uly

2007 r

ecom

mended that th

e form

er I

sla

nd C

ouncils b

e a

malg

am

ate

d to form

the T

orres S

trait I

sla

nd R

egio

nal C

ouncil.

Pursuant to

Part 1B

of th

e L

ocal G

overnm

ent A

ct 1993 a

nd in a

ccordance w

ith the L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008 th

e a

malg

am

ation w

as e

ffective from

the c

hangeover d

ate

of 15 M

arch 2

008.

The L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008 a

nd the L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion (

Transfe

rrin

g A

reas) A

mendm

ent R

egula

tion (

No.1

) 2

008 transfe

rred the a

ssets

and lia

bilitie

s o

f th

e form

er I

sla

nd C

ouncils

to the T

orres S

trait I

sla

nd R

egio

nal C

ouncil a

s a

t changeover d

ate

.

The a

ssets

and lia

bilitie

s o

f th

e form

er C

ouncils h

ave b

een r

ecognis

ed a

t th

e a

mounts

at w

hic

h the they w

ere r

ecognis

ed b

y the transfe

ror I

sla

nd C

ouncils a

s a

t th

e c

hangeover d

ay.

Torres S

trait I

sla

nd R

egio

nal C

ouncil a

dopte

d c

onsis

tent accounting p

olicie

s from

its

com

mencem

ent date

of 15 M

arch 2

008. I

n s

om

e c

ases, th

is r

esulted in a

dju

stm

ents

to the m

easurem

ent of assets

and lia

bilitie

s transfe

rred from

form

er C

ouncils a

s a

t 15 M

arch 2

008.

Deta

ils a

re a

s follow

s:

Torres S

trait I

sla

nd R

egio

nal

Council

Badu I

sla

nd C

ouncil

Boig

u I

sla

nd C

ouncil

Dauan I

sla

nd C

ouncil

Erub I

sla

nd C

ouncil

Ham

mond I

sla

nd C

ouncil

Iam

a I

sla

nd C

ouncil

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

AS

SE

TS

$$

$$

$$

$

Current A

ssets

Cash a

nd c

ash e

quiv

ale

nts

16,8

01,2

17

1,2

89,9

14

216,2

09

798,9

49

211,8

17

896,2

57

629,8

02

Trade a

nd o

ther r

eceiv

able

s6,9

71,6

16

1,1

67,4

62

68,7

76

8,3

89

1,5

08,3

37

99,1

73

400,8

37

Invento

rie

s942,4

48

401,0

81

18,5

56

9,8

51

57,6

60

13,0

00

7,0

17

Oth

er fin

ancia

l assets

2,1

56,4

46

-

570,7

54

256,3

04

-

41,5

19

-

26,8

71,7

27

2,8

58,4

57

874,2

95

1,0

73,4

93

1,7

77,8

14

1,0

49,9

49

1,0

37,6

56

Non-current assets

cla

ssifie

d a

s h

eld

for s

ale

Total current a

ssets

26,8

71,7

27

2,8

58,4

57

874,2

95

1,0

73,4

93

1,7

77,8

14

1,0

49,9

49

1,0

37,6

56

Non-current A

ssets

Receiv

able

s103,4

04

-

-

-

2,0

00

-

-

Investm

ents

350,0

02

-

-

-

-

-

-

Investm

ent property

-

-

-

-

-

-

-

Property

, pla

nt and e

quip

ment

233,6

47,2

28

45,7

69,6

89

12,7

81,5

24

7,2

40,8

17

22,6

79,2

89

8,7

60,5

30

12,6

46,6

40

Capital w

orks in p

rogress

11,1

51,0

83

-

401,6

27

611,1

47

435,8

50

-

127,6

25

Inta

ngib

le a

ssets

-

-

-

-

-

-

-

Total non-current a

ssets

245,2

51,7

17

45,7

69,6

89

13,1

83,1

51

7,8

51,9

64

23,1

17,1

39

8,7

60,5

30

12,7

74,2

65

TO

TA

L A

SS

ET

S272,1

23,4

44

48,6

28,1

46

14,0

57,4

46

8,9

25,4

57

24,8

94,9

53

9,8

10,4

79

13,8

11,9

21

LIA

BIL

IT

IE

S

Current L

iabilit

ies

Trade a

nd o

ther p

ayable

s5,2

29,7

22

469,4

27

235,9

36

646,0

82

651,7

97

120,1

14

302,2

96

Borrow

ings

27,6

58

-

-

-

-

-

-

Provis

ions

1,2

87,2

13

423,6

56

-

-

110,9

70

57,0

12

160,8

91

Oth

er

8,7

88,8

61

-

555,0

17

23,4

38

256,7

78

345,3

08

653,0

55

Total current lia

bilit

ies

15,3

33,4

54

893,0

83

790,9

53

669,5

20

1,0

19,5

45

522,4

34

1,1

16,2

42

Non-current L

iabilit

ies

Trade a

nd o

ther p

ayable

s1,3

49,4

50

1,3

11,7

43

-

28,3

16

-

-

-

Borrow

ings

632,8

89

-

-

-

-

-

-

Provis

ions

251,7

05

159,7

98

-

-

41,4

68

-

1,2

44

Total non-current lia

bilit

ies

2,2

34,0

44

1,4

71,5

41

-

28,3

16

41,4

68

-

1,2

44

TO

TA

L L

IA

BIL

IT

IE

S17,5

67,4

98

2,3

64,6

24

790,9

53

697,8

36

1,0

61,0

13

522,4

34

1,1

17,4

86

NE

T A

SS

ET

S T

RA

NS

FE

RR

ED

FR

OM

AB

OL

IS

HE

D C

OU

NC

IL

S254,5

55,9

46

46,2

63,5

22

13,2

66,4

93

8,2

27,6

21

23,8

33,9

40

9,2

88,0

45

12,6

94,4

35

(b) A

dju

stm

ents d

ue t

o a

ccountin

g p

olicy a

lignm

ent

2009

Property

, P

lant and E

quip

ment - T

orres S

trait I

sla

nd R

egio

nal C

ouncil .

$

This

resulted in the d

erecognitio

n o

f assets

transfe

rred from

the form

er C

ouncils

where the g

ross v

alu

e fell b

elo

w the a

sset recognitio

n threshold

.

( c

) N

et r

esult

attrib

utable

to C

ouncil b

efore n

et a

ssets t

ransferred f

rom

abolished C

ouncils

Net result a

ttrib

uta

ble

to C

ouncil

554,1

79,0

35

$

Gain

on r

estr

uctu

re o

f lo

cal governm

ent

(573,8

25,7

15)

$

Net result a

ttrib

uta

ble

to C

ouncil b

efo

re G

ain

on r

estr

uctu

re o

f lo

cal governm

ent

(19,6

46,6

80)

$

No

tes

to a

nd

fo

rmin

g p

art

of

the F

inan

cial Sta

tem

en

ts—

No

te 9

9G

ain

on r

estructure o

f local governm

ent

The L

ocal G

overnm

ent R

efo

rm

Com

mis

sio

n r

eport to

the M

inis

ter for L

ocal G

overnm

ent, P

lannin

g a

nd S

port on 2

7 J

uly

2007 r

ecom

mended that th

e form

er I

sla

nd C

ouncils b

e a

malg

am

ate

d to form

the T

orres S

trait I

sla

nd R

egio

nal C

ouncil.

Pursuant to

Part 1B

of th

e L

ocal G

overnm

ent A

ct 1993 a

nd in a

ccordance w

ith the L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008 th

e a

malg

am

ation w

as e

ffective from

the c

hangeover d

ate

of 15 M

arch 2

008.

The L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008 a

nd the L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion (

Transfe

rrin

g A

reas) A

mendm

ent R

egula

tion (

No.1

) 2

008 transfe

rred the a

ssets

and lia

bilitie

s o

f th

e form

er I

sla

nd C

ouncils

to the T

orres S

trait I

sla

nd R

egio

nal C

ouncil a

s a

t changeover d

ate

.

The a

ssets

and lia

bilitie

s o

f th

e form

er C

ouncils h

ave b

een r

ecognis

ed a

t th

e a

mounts

at w

hic

h the they w

ere r

ecognis

ed b

y the transfe

ror I

sla

nd C

ouncils a

s a

t th

e c

hangeover d

ay.

Torres S

trait I

sla

nd R

egio

nal C

ouncil a

dopte

d c

onsis

tent accounting p

olicie

s from

its

com

mencem

ent date

of 15 M

arch 2

008. I

n s

om

e c

ases, th

is r

esulted in a

dju

stm

ents

to the m

easurem

ent of assets

and lia

bilitie

s transfe

rred from

form

er C

ouncils a

s a

t 15 M

arch 2

008.

Deta

ils a

re a

s follow

s:

Kubin

Isla

nd C

ouncil

Mabuia

g I

sla

nd C

ouncil

Mer I

sla

nd C

ouncil

Porum

a I

sla

nd C

ouncil

Saib

ai Isla

nd C

ouncil

St P

auls

Isla

nd C

ouncil

Ugar I

sla

nd C

ouncil

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

14 M

arch 2

008

AS

SE

TS

$$

$$

$$

$

Current A

ssets

Cash a

nd c

ash e

quiv

ale

nts

1,5

02,1

18

1,3

26,4

40

110,4

76

1,1

32,5

19

830,0

77

307,4

46

399,7

21

Trade a

nd o

ther r

eceiv

able

s400,1

72

141,0

74

157,3

10

1,2

02,7

69

634,1

40

82,3

24

89,0

62

Invento

rie

s16,9

80

134,7

44

67,9

55

14,6

10

111,5

21

76,4

43

-

Oth

er fin

ancia

l assets

17,3

19

151,2

60

848,1

99

-

162,2

10

62,1

12

5,4

89

1,9

36,5

89

1,7

53,5

18

1,1

83,9

40

2,3

49,8

98

1,7

37,9

48

528,3

25

494,2

72

Non-current assets

cla

ssifie

d a

s h

eld

for s

ale

Total current a

ssets

1,9

36,5

89

1,7

53,5

18

1,1

83,9

40

2,3

49,8

98

1,7

37,9

48

528,3

25

494,2

72

Non-current A

ssets

Receiv

able

s-

-

-

92,7

49

-

8,6

55

-

Investm

ents

-

-

-

350,0

02

-

-

-

Investm

ent property

-

-

-

-

-

-

-

Property

, pla

nt and e

quip

ment

14,7

41,3

65

8,3

91,1

39

23,4

37,2

15

10,0

70,3

90

19,1

48,9

56

17,7

49,9

97

5,2

47,7

95

Capital w

orks in p

rogress

-

2,1

27,5

52

2,6

30,8

80

1,4

22,5

81

-

1,1

90,2

88

494,5

25

Inta

ngib

le a

ssets

-

-

-

-

-

-

-

Total non-current a

ssets

14,7

41,3

65

10,5

18,6

91

26,0

68,0

95

11,9

35,7

22

19,1

48,9

56

18,9

48,9

40

5,7

42,3

20

TO

TA

L A

SS

ET

S16,6

77,9

54

12,2

72,2

09

27,2

52,0

35

14,2

85,6

20

20,8

86,9

04

19,4

77,2

65

6,2

36,5

92

LIA

BIL

IT

IE

S

Current L

iabilit

ies

Trade a

nd o

ther p

ayable

s17,2

39

169,5

35

214,0

78

375,1

90

1,3

87,3

52

125,0

15

6,2

50

Borrow

ings

-

-

-

-

-

-

-

Provis

ions

-

-

-

-

97,6

40

84,6

43

10,4

35

Oth

er

650,4

71

362,0

69

961,0

55

1,0

99,7

71

533,5

00

347,6

98

434,4

57

Total current lia

bilit

ies

667,7

10

531,6

04

1,1

75,1

33

1,4

74,9

61

2,0

18,4

92

557,3

56

451,1

42

Non-current L

iabilit

ies

Trade a

nd o

ther p

ayable

s-

-

-

-

-

-

-

Borrow

ings

-

-

-

-

-

-

-

Provis

ions

-

-

-

-

49,1

95

-

-

Total non-current lia

bilit

ies

-

-

-

-

49,1

95

-

-

TO

TA

L L

IA

BIL

IT

IE

S667,7

10

531,6

04

1,1

75,1

33

1,4

74,9

61

2,0

67,6

87

557,3

56

451,1

42

NE

T A

SS

ET

S T

RA

NS

FE

RR

ED

FR

OM

AB

OL

IS

HE

D C

OU

NC

IL

S16,0

10,2

44

11,7

40,6

05

26,0

76,9

02

12,8

10,6

59

18,8

19,2

17

18,9

19,9

09

5,7

85,4

50

(b) A

dju

stm

ents d

ue t

o a

ccountin

g p

olicy a

lignm

ent

2009

Property

, P

lant and E

quip

ment - T

orres S

trait I

sla

nd R

egio

nal C

ouncil .

$

This

resulted in the d

erecognitio

n o

f assets

transfe

rred from

the form

er C

ouncils

where the g

ross v

alu

e fell b

elo

w the a

sset recognitio

n threshold

.

( c

) N

et r

esult

attrib

utable

to C

ouncil b

efore n

et a

ssets t

ransferred f

rom

abolished C

ouncils

Net result a

ttrib

uta

ble

to C

ouncil

554,1

79,0

35

$

Gain

on r

estr

uctu

re o

f lo

cal governm

ent

(573,8

25,7

15)

$

Net result a

ttrib

uta

ble

to C

ouncil b

efo

re G

ain

on r

estr

uctu

re o

f lo

cal governm

ent

(19,6

46,6

80)

$

No

tes

to a

nd

fo

rmin

g p

art

of

the F

inan

cial Sta

tem

en

ts—

No

te 9

9G

ain

on r

estructure o

f local governm

ent

The L

ocal G

overnm

ent R

efo

rm

Com

mis

sio

n r

eport to

the M

inis

ter for L

ocal G

overnm

ent, P

lannin

g a

nd S

port on 2

7 J

uly

2007 r

ecom

mended that th

e form

er I

sla

nd C

ouncils b

e a

malg

am

ate

d t

o f

orm

the T

orres S

trait I

sla

nd

Regio

nal C

ouncil.

Pursuant to

Part 1B

of th

e L

ocal G

overnm

ent A

ct 1993 a

nd in a

ccord

ance w

ith the L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008

the a

malg

am

ation w

as e

ffective f

rom

the c

hangeover d

ate

of 1

5 M

arch 2

00

8.

The L

ocal G

overnm

ent R

efo

rm

Im

ple

menta

tion R

egula

tion 2

008 a

nd t

he L

ocal G

overnm

ent

Refo

rm

Im

ple

menta

tion (

Transfe

rrin

g A

reas) A

mendm

ent R

egula

tion (

No.1

) 2

008

transfe

rred

the a

ssets

and lia

bilitie

s o

f th

e fo

rm

er I

sla

nd C

ouncils

to the T

orres S

trait I

sla

nd R

egio

nal C

ouncil a

s a

t changeover d

ate

.

The a

ssets

and lia

bilitie

s o

f th

e form

er C

ouncils h

ave b

een r

ecognis

ed a

t th

e a

mo

unts

at w

hic

h the they w

ere r

ecognis

ed b

y the transfe

ror I

sla

nd C

ouncils a

s a

t th

e c

hangeo

ver d

ay.

Torres S

trait I

sla

nd R

egio

nal C

ouncil a

dopte

d c

onsis

tent accounting p

olicie

s fro

m its

com

mencem

ent

date

of 15 M

arch 2

008. I

n s

om

e c

ases, th

is r

esulted in a

dju

stm

ents

to

the m

easurem

ent of

assets

and lia

bilitie

s transfe

rred

fro

m

form

er C

ouncils a

s a

t 15 M

arch 2

008.

Deta

ils a

re a

s follow

s:

Warraber I

sla

nd C

ouncil

Yo

rke I

sla

nd C

ouncil

Isla

nd C

o-ordin

ating

Council

Tota

l assets

and lia

bilitie

s

recognis

ed

by T

orres S

trait I

sla

nd

Regio

nal C

ouncil

Ad

justm

ents

due t

o a

ccounting

policy a

lignm

ent

Gain

on r

estr

uctu

re o

f lo

cal

governm

ent

14 M

arch 2

008

14

March 2

008

14 M

arch 2

008

15 M

arch 2

008

200

92

00

9

AS

SE

TS

$$

$$

$$

Current A

ssets

Cash a

nd c

ash e

quiv

ale

nts

1,9

55,2

91

1,7

66,3

72

3,4

27,8

09

16

,801

,217

16,8

01,2

17

Trade a

nd o

ther r

eceiv

able

s4

63,7

86

273,6

14

274,3

91

6

,971

,616

6,9

71,6

16

Invento

rie

s10,9

50

2,0

80

-

94

2,4

48

94

2,4

48

Oth

er fin

ancia

l assets

12,3

81

20,1

00

8,7

99

2,1

56

,446

2,1

56,4

46

2,4

42,4

08

2,0

62,1

66

3,7

10,9

99

26

,871

,727

-

2

6,8

71,7

27

Non-current assets

cla

ssifie

d a

s h

eld

for s

ale

-

Total current a

ssets

2,4

42,4

08

2,0

62,1

66

3,7

10,9

99

26

,871

,727

-

2

6,8

71,7

27

Non-current A

ssets

Receiv

able

s-

-

-

10

3,4

04

10

3,4

04

Investm

ents

-

-

-

35

0,0

02

35

0,0

02

Investm

ent property

-

-

-

-

-

Property

, pla

nt and e

quip

ment

10,8

94,9

31

12,3

27,5

12

1,7

59,4

39

2

33

,647

,228

3

21

,464

,563

55

5,1

11,7

91

Capital w

orks in p

rogress

670,3

43

1,0

38,6

65

-

11

,151

,083

(1

0,0

44,1

92)

1

,10

6,8

91

Inta

ngib

le a

ssets

-

-

-

-

-

Total non-current a

ssets

11,5

65,2

74

13,3

66,1

77

1,7

59,4

39

2

45

,251

,717

3

11

,420

,371

55

6,6

72,0

88

TO

TA

L A

SS

ET

S14,0

07,6

82

15,4

28,3

43

5,4

70,4

38

2

72

,123

,444

3

11

,420

,371

58

3,5

43,8

15

LIA

BIL

IT

IE

S

Current L

iabilit

ies

Trade a

nd o

ther p

ayable

s94,0

23

115,7

83

299,6

05

5

,229

,722

(75

1,0

81)

4

,47

8,6

41

Borrow

ings

-

-

27,6

58

27,6

58

-

2

7,6

58

Provis

ions

54,0

57

15,1

68

272,7

41

1

,287

,213

1,2

87,2

13

Oth

er

1,3

59,0

73

1,2

07,1

71

-

8,7

88

,861

(8,0

21,3

31)

76

7,5

30

Total current lia

bilit

ies

1,5

07,1

53

1,3

38,1

22

600,0

04

15

,333

,454

(8,7

72,4

12)

6,5

61,0

42

Non-current L

iabilit

ies

Trade a

nd o

ther p

ayable

s9,3

91

-

-

1,3

49

,450

1,3

49,4

50

Borrow

ings

-

-

632,8

89

63

2,8

89

63

2,8

89

Provis

ions

-

-

-

25

1,7

05

923

,014

1,1

74,7

19

Total non-current lia

bilit

ies

9,3

91

-

632,8

89

2

,234

,044

923

,014

3,1

57,0

58

TO

TA

L L

IA

BIL

IT

IE

S1,5

16,5

44

1,3

38,1

22

1,2

32,8

93

17

,567

,498

(7,8

49,3

98)

9,7

18,1

00

NE

T A

SS

ET

S T

RA

NS

FE

RR

ED

FR

OM

AB

OL

IS

HE

D C

OU

NC

IL

S12,4

91,1

38

14,0

90,2

21

4,2

37,5

45

2

54

,555

,946

3

19

,269

,769

57

3,8

25,7

15

(b) A

dju

stm

ents d

ue t

o a

ccountin

g p

olicy a

lignm

ent

200

9

Property

, P

lant and E

quip

ment - T

orres S

trait I

sla

nd R

egio

nal C

ouncil .

$

This

resulted in the d

erecognitio

n o

f assets

transfe

rred from

the form

er C

ouncils

where the g

ross v

alu

e fell b

elo

w the a

sset recognitio

n threshold

.

( c

) N

et r

esult

attrib

utable

to C

ouncil b

efore n

et a

ssets t

ransferred f

rom

ab

oli

sh

ed C

ouncils

Net result a

ttrib

uta

ble

to C

ouncil

554

,17

9,0

35

$

Gain

on r

estr

uctu

re o

f lo

cal governm

ent

(5

73,8

25

,715

)$

Net result a

ttrib

uta

ble

to C

ouncil b

efo

re G

ain

on r

estr

uctu

re o

f lo

cal go

vernm

ent

(1

9,6

46

,680

)$

61

Notes to and forming part of the Financial

Statements—Note(s) 10, 11 and 12

10 Cash and cash equivalents

Cash at bank and on hand 14,343,232

Deposits at call 1,161,372

Less Bank Overdraft -

Balance per cash flow statement 15,504,604

Externally imposed expenditure restrictions at the reporting date

relate to the following cash assets:

Unspent government grants and subsidies 1,516,065

Unspent developer contributions -

Unspent loan monies -

Total unspent restricted cash for capital projects 1,516,065

Cash and deposits at call are held in the National Australia Bank in normal term deposits and business

11 Trade and other receivables

Current

Rateable revenue and utility charges -

Water charges not yet levied -

Other debtors 9,572,412

Less provision for doubtful debts (2,302,439)

GST recoverable -

Loans and advances to controlled entities 115,099

Prepayments and accrued income 5,881,102

13,266,174

No interest is charged on other debtors.

There is no concentration of credit risk for other debtors receivable.

12 Inventories

Current

Inventories held for sale:

Miscellaneous saleable items 893,334

Other trading stocks -

Total inventories for consumption 893,334

Valued at lower of cost and net realisable value

Inventories held for distribution:

Quarry and road materials -

Plant and equipment stores -

Total inventories for distribution -

Valued at the cost, adjusted when applicable for any loss of service potential

Land purchased for development and sale -

Total inventories 893,334

Loans relate to advances made to Poruma Island Pty Ltd. This loan is interest free and has no

scheduled date for repayment. The credit risk on this loan is considered low.

Other debtors includes a debt owing from Saibai Construction Pty Ltd of $988,957 which is fully

provided for in these financial statements having peviously been fully provided for in the financial

statements of Saibai Island Council in prior years.

cheque accounts. The Bank currently has a Standard & Poor's credit rating of AA and a Moody's

rating of Aa1.

62

Notes to and forming part of the Financial

Statements—Note 13

13 Equity investments

Interest in controlled entity - Poruma Island Pty Ltd 350,002

350,002 -

Reconciliation of non-traded shares

Carrying amount at beginning of period 350,002

Carrying amount at the period end 350,002

The shares in Poruma Island Pty Ltd are not traded on an active market and

their fair value cannot be ascertained reliably. Accordingly they are shown

at cost.

Poruma Island Pty Ltd (CAN 098 641 162) was incorporated on 5

November 2001, to manage the Poruma Island Resort. The operations of

the controlled entity have not been consolidated within these financial

statements. The results of operations for the financial years 2007-2008

and 2008-2009 are disclosed below. The financial reporting for a 15

month period did not apply to Poruma Island Pty Ltd as part of the Local

Government amalgamation.

2009 2008

$ $

Net Profit/(Loss) from ordinary activities before income tax (98,469) (15,193)

Total assets 653,660 681,565

Total liabilities 459,954 389,389

Total equity 193,706 292,177

No

tes

to a

nd

fo

rmin

g p

art

of

the F

inan

cial Sta

tem

en

ts—

Note

14

14

Pro

pert

y, pla

nt

and e

quip

ment

(a)

Tota

l

Bas

is o

f m

easu

rem

ent

Revalu

ation

Revalu

ation

Revalu

ation

Cost

Revalu

ation

Revalu

ation

Revalu

ation

Revalu

ation

Revalu

ation

Revalu

ation

Revalu

ation

-

2009

2009

2009

2009

2009

2009

2009

2009

2009

2009

2009

2009

Asset

Valu

es

$$

$$

$$

$$

$$

$$

Net

val

ue o

f as

sets

tra

nsfe

rred

fro

m a

bolis

hed C

oun

cils

279,6

70,8

00

53,4

57,6

00

6,2

85,0

00

45,4

46,3

00

940,0

00

2,1

61,0

00

66,2

72,0

00

84,0

67,9

00

11,2

07,8

00

630,0

00

11,3

59,7

00

561,4

98,1

00

Additi

ons

at co

st15,5

00

309,5

63

325,0

63

Der

ecogi

tion

due

to c

hang

e in

ass

et r

ecogn

ition

thre

shold

-

Dis

posa

ls

-

Rev

alua

tion

adju

stm

ent to

the

AR

R-

Rev

alua

tion

adju

stm

ent to

Exp

ense

-

Ass

ets

clas

sifie

d a

s he

ld for

sale

-

Ass

ets

tran

sfer

red to I

nves

tmen

t P

roper

ty-

Inte

rnal

tra

nsfe

rs-

Clo

sing

gro

ss v

alue

279,6

70,8

00

53,4

73,1

00

6,2

85,0

00

45,4

46,3

00

940,0

00

2,1

61,0

00

66,2

72,0

00

84,0

67,9

00

11,2

07,8

00

630,0

00

11,6

69,2

63

561,8

23,1

63

Accum

ula

ted D

epre

cia

tion a

nd I

mpair

ment

Open

ing

bal

ance

-

Dep

reci

atio

n pro

vided

in p

erio

d10,3

43,0

82

2,9

61,4

14

380,7

71

2,3

87,9

14

27,2

87

74,9

26

3,3

14,4

58

4,8

11,9

18

512,5

04

-

2,8

07,5

04

27,6

21,7

78

Dep

reci

atio

n on

dis

posa

ls-

Rev

alua

tion

adju

stm

ent to

the

AR

R-

Impai

rmen

t ad

just

men

t to

the

AR

R-

Impai

rmen

t ad

just

men

t to

Inc

om

e-

Impai

rmen

t on

dis

posa

ls-

Ass

ets

tran

sfer

red to I

nves

tmen

t P

roper

ty-

Inte

rnal

tra

nsfe

rs-

Acc

umul

ated

dep

reci

atio

n at

per

iod e

nd10,3

43,0

82

2,9

61,4

14

380,7

71

2,3

87,9

14

27,2

87

74,9

26

3,3

14,4

58

2,8

07,5

04

27,6

21,7

78

Cons

olid

ated

book v

alue

at per

iod e

nd269,3

27,7

18

50,5

11,6

86

5,9

04,2

29

43,0

58,3

86

912,7

13

2,0

86,0

74

62,9

57,5

42

8,8

61,7

59

534,2

01,3

85

Res

idua

l val

ue-

-

-

-

-

Ran

ge o

f es

timat

ed u

sefu

l life

in y

ears

1 -

49

1 -

56

2.5

- 4

96 -

41

41 -

46

11 -

49

2 -

38

4 -

38

2 -

44

Lan

d: N

ot

dep

reci

ated

Impro

vem

ents

:

7

1 -

26

-

Build

ings

(Corp

ora

te)

Roads/

Tra

nsp

ort

Netw

ork

Build

ings

(Com

munity)

Recre

ation

Facili

ties

Sto

rmw

ate

r

Dra

inage

Netw

ork

Flo

od M

itig

ation

Netw

ork

Wate

r S

upply

Netw

ork

Pla

nt

and

Equip

ment

Sew

era

ge

Netw

ork

Wharv

es,

Pie

rs,

Jett

ies

and

Ponto

ons

Land A

ssets

64

Notes to and forming part of the Financial

Statements—Note(s) 14, 15 and 16

2009

Note $

14 (b) Property, plant and equipment valuations were determined by reference to the following:

Land and Improvements

Land has been included at fair value as at 14 March 2008 as determined by

Rushton AssetVal Pty Ltd, Property, Plant, Equipment and Infrastructure Consultants.

Land under infrastructure and reserve land does not have a value for the purpose of the

Torres Strait Island Regional Council's financial statements.

Buildings

Buildings have been included at their fair value as at 14 March 2008 as determined by

Rushton AssetVal Pty Ltd, Property, Plant, Equipment and Infrastructure Consultants,

less accumulated depreciation as at 30 June 2009.

Plant and Equipment

Other plant and equipment has been included at fair value as at 14 March 2008

as determined by Rushton AssetVal Pty Ltd, Property, Plant, Equipment and

Infrastructure Consultants, less accumulated depreciation as at 30 June 2009.

Infrastructure

Infrastructure has been included at fair value as at 14 March 2008 as determined by

Rushton AssetVal Pty Ltd, Property, Plant, Equipment and Infrastructure Consultants,

less accumulated depreciation as at 30 June 2009.

15 Capital work in progress 3,564,213

3,564,213

16 Trade and other payables

Current

Creditors and accruals 5,011,101

GST Payable 1,809,395

Annual leave 1,128,412

7,948,908

Non-Current

Annual leave 356,534

356,534

Capital work in progress reflects expenditure incurred on infrastructure and housing programs that was

not complete at 30 June 2009 and therefore was not subject to the valuation exercise. Capital work in

progress is held at cost.

65

Notes to and forming part of the Financial

Statements—Note 17

17 Borrowings

Current

Loans QTC 18 70,080

Finance leases 19 35,086

105,166

Non-Current

Loans QTC 18 538,752

Finance leases 19 18,860

557,612

(a) Bank Overdraft

(b) Unsecured Borrowings

Unsecured borrowings are provided by the Queensland Treasury Corporation (QTC).

All borrowings are in $A denominated amounts and carried at amortised cost, interest being expensed as it

accrues. No interest has been capitalised during the current or comparative reporting period. Expected final

repayment dates vary from 31 December 2009 to 31 December 2014.

There have been no defaults or breaches of the loan agreement during the period.

Principal and interest repayments are made quarterly in arrears.

At 30 June 2009 Council has no bank overdraft facility.

66

Notes to and forming part of the Financial

Statements—Note(s) 18 and 19

18 Loans

(a) Queensland Treasury Corporation

Transferred from Island Co-ordinating Council as part of

Government restructure 1.A, 9 660,588

Loans raised -

Principal repayments (99,724)

Interest and admin charges accrued 47,967

Book value at period end 608,831

Classified as :

Current 70,080

Non-current 538,752

608,831

The loan market value at the reporting date was $602,767. This

represents the value of the debt if the Council repaid it at that date. As it

is the intention of the Council to hold the debt for its term, no

adjustment is required to be made in these accounts.

19 Finance leases

Movements in finance lease during the reporting period were as follows:

Transferred from Badu Island Council as part of Government

restructure 1.A, 9 94,058

Payments made in the period (40,112)

Minimum lease payments 53,946

The above minimum lease payments are payable as follows:

Not later than one year 40,068

Later than 1 year but not later than 5 years 18,860

Later than 5 years -

58,928

Less: Future finance charges (4,982)

Lease liability recognised in the financial statements 53,946

Classified as:

Current 35,086

Non-Current 18,860

53,946

The present value of above minimum lease payments are payable as follows:

Not later than one year 40,068

Later than 1 year but not later than 5 years 18,860

Later than 5 years -

58,928

There are 4 lease agreements which commenced an 14 December

2006 for a period of 4 years.

The carrying value of the leased assets is as follows:

Motor Vehicles 63,250

67

Notes to and forming part of the Financial

Statements—Note 20

20 Provisions

Current

Long service leave 513,883

513,883

Non-Current

Quarry rehabilitation (a) -

Refuse restoration (b) 2,315,114

Long service leave (c) 287,395

2,602,509

Details of movements in provisions:

(a) Quarry rehabilitation

Transferred from former Island Councils as part of Government

restructure 1.A, 9 -

Increase in provision - finance cost -

Increase (decrease) in provision due to change in discount rate -

Balance at the end of period -

The present value of the estimated cost of restoring the

Quarry site on Badu Island to a useable state at the end of its useful

life has been assessed as $nil. The quarry is expected to have a

useful life of at least a further 30 years and no reliable costs of re-

habilitation are currently available.

(b) Refuse restoration

Transferred from former Island Councils as part of Government

restructure - change in accounting policy 1.A, 9 2,232,920

Increase in provision - finance cost -

Increase in provision due to change in discount rate 82,194

Balance at the end of period 2,315,114

This is the present value of the estimated cost of restoring the

Refuse disposal site to a useable state at the end of its useful life.

The projected cost is $2,662,060 and this cost is expected to be

incurred in 2013.

( c) Long Service Leave

Transferred from former Island Councils as part of Government

restructure 1.A, 9 661,651

Long service leave entitlement arising -

Long Service entitlement extinguished -

Long Service entitlement paid -

Balance at the end of period 661,651

Current 513,883

Non current 287,395

Balance at the end of period 801,278

68

Notes to and forming part of the Financial

Statements—Note(s) 21,22 and 23

21 Other liabilities

Current

Unspent Grant Funds 1,516,065

1,516,065

22 Shire Capital

Calculation of retained surplus

Cash and cash Equivalents -

Less:

Reserves (other than Asset Revaluation Reserve) -

Unearned income -

Funded depreciation carried forward -

Cash backed rehabilitation provisions -

Funded employee entitlements (non-current) -

Unspent loan funds -

Unspent proceeds of sale (earmarked for capital expenditure) -

Working cash requirement (proportion of rates to first collection date) -

Retained surplus/(Deficit) -

Total capital and surplus -

Capital Account -

Capital account opening balance -

Transfer to/(from) capital -

Closing Balance -

23 Retained surplus

Movements in the retained surplus were as follows:

Retained surplus/(deficit) at the beginning of financial year -

Change in Net Assets resulting from operations after gain on restructuring 554,179,035

Transfers (to) from capital reserves for future capital project

funding, or from reserves funds that have been expended: 24

Plant and Fleet Replacement reserve -

Transfers (to) recurrent reserves for future project

funding, or from reserves funds that have been expended:

Operating reserve -

Operating reserve - natural disaster -

Transfers (to)/from Shire Capital -

Retained surplus at the end of the financial year 554,179,035

69

Notes to and forming part of the Financial

Statements—Note 24

24 Capital and other reserves

(a) Summary of reserves held for funding future capital expenditure:

(i) Plant and Fleet Replacement reserve -

-

(b) Summary of reserves held for funding future recurrent expenditure:

(i) Operating reserve -

(ii) Operating reserve - natural disaster -

Total reserves -

( c) Movements in capital reserves are analysed as follows:

(i) Plant and Fleet Replacement reserve

Balance at the beginning of period -

Transfer from retained earnings for future expenditure -

Transfer to retained earnings -

Balance at the end of period -

(d) Movements in recurrent reserves are analysed as follows:

(i) Operating reserve

Balance at the beginning of period -

Transfer from retained earnings for future expenditure -

Transfer to retained earnings -

Balance at the end of period -

Movements in recurrent reserves are analysed as follows:

(ii) Operating reserve - natural disaster

Balance at the beginning of period -

Transfer from retained earnings for future expenditure -

Transfer to retained earnings -

Balance at the end of period -

As the outcome of the Local Government Reform Commission process is

70

Notes to and forming part of the Financial

Statements—Note(s) 25 and 26

25 Commitments for expenditure

(a) Operating leases

Minimum lease payments in relation to non-cancellable operating

leases are as follows:

Within one year -

One to five years 379,820

More than five years 227,665

607,485

(b) Contractual Commitments

Contractual commitments at balance date but not recognised in the financial

statements are as follows:

Unfulfilled purchase orders 2,320,909

2,320,909

26 Contingent liabilities

Details and estimates of maximum amounts of contingent liabilities are as follows:

Local Government Mutual

The Torres Strait Island Regional Council is a member of the local

government mutual liability self-insurance pool, LGM Queensland. In

the event of the pool being wound up or it is unable to meet its debts as

they fall due, the trust deed and rules provide that any accumulated

deficit will be met by the individual pool members in the same

proportion as their contribution is to the total pool contributions in

respect to any year that a deficit arises.

As at 30 June 2008 the financial statements of LGM Queensland

reported an accumulated surplus and it is not anticipated any liability

will arise in the 2009 financial year.

Local Government Workcare

The Torres Strait Island Regional Council is a member of the

Queensland local government worker's compensation self-insurance

scheme, Local Government Workcare. Under this scheme the Council

has provided an indemnity towards a bank guarantee to cover bad debts

which may remain should the self insurance licence be cancelled and

there was insufficient funds available to cover outstanding liabilities.

 Only the Queensland Government’s workers compensation authority 

may call on any part of the guarantee should the above circumstances

arise. The Council's maximum exposure to the bank guarantee is

$120,000.

71

Notes to and forming part of the Financial

Statements—Note(s) 27 and 28

27 Events after balance date

There were no material adjusting events after the balance date.

28 Superannuation

The Torres Strait Island Regional Council contributes to the Local Government Superannuation Scheme

(the scheme) in respect of certain of its employees.. The scheme has two elements referred to as

the defined benefits scheme and the accumulation scheme.

Both these schemes are defined contribution schemes as defined in the Australian

Accounting Standard AASB119 Employee benefits . Council has no liability to

or interest in the scheme other than the payment of the statutory contributions.

Any amount by which either scheme is over or under funded would only affect future

benefits and is not an asset or liability of the council.

Accordingly there is no recognition in the financial statements of any over- or under-

funding of the scheme.

The audited general purpose financial report of the scheme as at 30 June 2008 (the most

recent available) which was not subject to any audit qualification, indicates that the assets of

the scheme are sufficient to meet the accrued benefits.

The general purpose financial statements disclose that the most recent actuarial assessment

of the scheme was undertaken as at 1 July 2006. The actuary indicated that without

improvements to benefit conditions, or other unanticipated events, current contribution rates

would be sufficient to meet members benefits as they accrue.

The Queensland Local Government Superannuation Board, the trustee of the scheme, advised

that the local government superannuation scheme was a complying superannuation scheme

for the purpose of the Commonwealth Superannuation Industry (Supervision) legislation.

The amount of superannuation contributions paid by Torres Strait Island Regional Council

to the superannuation scheme in this period for the benefit of employees was: 475,780

The balance of contributions for the period of $550,580 was paid after the year end, and this liability

is recognised within accruals in note 16.

72

Notes to and forming part of the Financial

Statements—Note(s) 29 and 30

29 Trust funds

Monies collected or held on behalf of residents yet to be paid 622,434

622,434

The Torres Strait Island Regional Council performs only a custodial role in respect

of these monies. As these funds cannot be used by the Council, they are

not brought to account in these financial statements.

30 Reconciliation of result from ordinary activities to net cash inflow (outflow)

from operating activities

Result from ordinary activities 554,179,035

Non-cash operating items:

Depreciation and amortisation 27,621,778

Revaluation down of property, plant and equipment -

Loss on impairment of property plant and equipment -

Change in future rehabilitation costs 82,194

27,703,971

Investing and development activities :

Net (profit) loss on disposal of non current assets -

Capital grants and contributions (13,053,276)

Provision for restoration added to asset

Profit retained in joint venture -

(13,053,276)

Financing Activities

-

Changes in operating assets and liabilities :

(Increase) decrease in receivables (4,034,708)

(Increase) decrease in other operating assets 49,114

Increase (decrease) in payables (393,297)

Increase (decrease) in other provisions 2,019,095

Increase (decrease) in other liabilities -

(2,359,796)

Gain on restructure of local government (573,825,715)

Net cash outflow from operating activities (7,355,781)

73

Notes to and forming part of the Financial

Statements—Note 31

31 Financial Risk Management

Torres Strait Island Regional Council measures risk exposure using a variety of methods as follows:

Risk exposure Measurement

method

Interest rate risk Sensitivity

analysis

Liquidity risk Maturity

analysisCredit Risk Ageing analysis

(i) Credit Risk

No collateral is held as security relating to the financial assets held by the Council.

The following table represents the Council's maximum exposure to credit risk:

2009

Financial Assets $

Cash and cash equivalents - QTC 1,161,372

Cash and cash equivalents – bank 15,357,759

Receivables - other 14,660,694

Total 31,179,825

The maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the gross carrying amount of those

assets inclusive of any provisions for impairment.

Torres Strait Island Regional Council’s activities expose it to a variety of financial risks including interest rate risk, credit risk, and liquidity risk.

Exposure to financial risks is managed in accordance with Council approved policies on financial risk management. These policies focus on

managing the volatility of financial markets and seek to minimise potential adverse effects on the financial performance of the Council.

In the case of rate receivables, the Council has the power to sell the property to recover any defaulted amounts. In effect this power protects the

Council against credit risk in the case of these debts.

The Council is exposed to credit risk through its investments with the Queensland Treasury Corporation (QTC) and National Australia Bank. The

QTC Cash Fund is an asset management portfolio that invests with a wide variety of high credit rating counterparties. Deposits are capital

guaranteed. Other investments are held with National Australia bank and whilst not capital guaranteed, the likelihood of a credit failure is remote.

The National Australia Bank has a Standard & Poor's credit rating of AA and a Moody's rating of Aa1.

Credit risk exposure refers to the situation where the Council may incur financial loss as a result of another party to a financial instrument failing

to discharge their obligations.

In other cases, the Council assesses the credit risk before providing goods or services and applies normal business credit protection procedures to

minimise the risk.

74

Notes to and forming part of the Financial

Statements—Note 31

Past due or impaired

The following table represents an analysis of the age of the Council's financial assets that are either fully performing, past due or impaired:

Fully

Performing

Impaired Total

$ Less than 30

days 30-60 days 61-90 days

$ $

$ $ $

Receivables

(ii) Liquidity Risk

Financial Liabilities

0 to 1 year 1 to 5 years Over 5 years Total

$ $ $ $

2009

QTC Loan 71,869 287,475 503,081 862,425

Financing Arrangements

Unrestricted access was available at balance date to the lines of credit listed below:

2009

$

Bank Overdraft facility 100,000

The bank overdraft facility is related to the maximum exposure associated with Councils procurement cards.

(iii) Interest Rate Risk

The Council does not undertake any hedging of interest rate risk.

The following table sets out the liquidity risk of financial liabilities held by the Council in a format as it might be provided to management. The

amounts disclosed in the maturity analysis represent the contractual undiscounted cash flows at balance date:

The Council is exposed to interest rate risk through its finance lease borrowings, borrowings from the Queensland Treasury Corporation.

Past due

No financial assets have had their terms renegotiated so as to prevent them from being past due or impaired, and are stated at the carrying amounts

as indicated.

(2,233,027)

The risk in borrowing is effectively managed by borrowing mainly /(only) from the Queensland Treasury Corporation and having access to a mix

of floating and fixed funding sources such that the desired interest rate risk exposure can be constructed. Interest rate risk in other areas is

minimal.

14,660,694

Liquidity risk refers to the situation where the Council may encounter difficulty in meeting obligations associated with financial liabilities. The

Council is exposed to liquidity risk through its trading in the normal course of business and borrowings from the Queensland Treasury

Corporation for capital works.

The Corporation manages its exposure to liquidity risk by maintaining sufficient undrawn facilities, both short and long term, to cater for

unexpected volatility in cash flows. These facilities are disclosed in the Borrowings note 17.

5,871,519 - - 11,022,202